If you’re an investor constantly on the hunt for promising opportunities, you may see clear bargains emerging in robotics stocks. With valuations depressed, I believe savvy investors can position themselves for big gains when this high-growth sector bounces back. In the current environment, robotics stocks have remained depressed for a couple reasons.
First, the broader selloff in high-multiple tech names due to rising interest rates has weighed on the sector. Additionally, near-term macroeconomic uncertainties have put a dampener on long-term growth stories. However, I believe these conditions have created a chance to buy innovative robotics companies at attractive valuations.
I would also like to note that I do not think robotics stocks are in the same category as “AI stocks.” The AI stocks that are plateauing right now are generally in the software tech industry, and have use cases almost exclusive to the white-collar industry. Robotics companies are more involved in tangible operations. Thus, the secular tailwinds driving automation remain fully intact in my view. Businesses still face an imperative to improve productivity and efficiency.
I mentioned near the end of July that the “…AI rally is unsustainable and will soon fall on its face.” Indeed late July was the inflection point, and the slump in many AI stocks has started to materialize more sharply. Still, artificial intelligence and robotics technology continue rapidly advancing, and adoption will likely only accelerate, regardless of where stock valuations are headed. Robotics offer the best value right now, and here are three stocks to look into.
Let’s start with iRobot (NASDAQ:IRBT), the innovative company that essentially pioneered the consumer robotics market with its Roomba robotic vacuums. However, shares of IRBT stock have plunged 37% over the past year on slowing growth and concerns over competition. But with the stock now trading at just 1-times sales compared to 4-times at peak, I believe the negativity is overdone.
iRobot is expanding beyond vacuums into areas like lawn care, showcasing its robust R&D capabilities. The company is also building out software and AI offerings to improve functionality and make robots more autonomous. With patented technologies securing its competitive moat, I see ample room for iRobot to extend its leadership as home robotics become more mainstream.
Wall Street forecasts a 19.7% revenue contraction this year, before the company returns to a positive double-digit growth trajectory. This decline seems to be priced in, and I expect sales to accelerate as new products gain traction. At these depressed multiples, iRobot presents an attractive opportunity in my view. The stock could easily more than double to historical valuation levels, delivering sizable gains for long-term investors.
As a final note, I wouldn’t shy away from having mixed feelings with this stock. It only has one recent rating from Wall Street, which is hold. That said, the rating still implies 35% upside.
Next up is UiPath (NYSE:PATH), a leader in robotic process automation (RPA) technology. As far as companies that are well-positioned to ride the automation boom are concerned, UiPath is among the best options right now, in my view.
By using software bots to automate repetitive desktop tasks, UiPath helps companies cut costs and boost productivity. This is a software AI company, but I think its products also translate well to the robotics space and aren’t exclusive to the white-collar tech sector. Its sales growth is expected to remain near 18% year-over-year for the foreseeable future. However, the stock is currently changing hands near all-time lows, dropping 80% from its 2021 IPO level.
Yes, UiPath is currently unprofitable, as the company invests aggressively for growth. However, it still looks underpriced relative to rivals. UiPath’s ability to automate workflows across functions from IT to HR gives the company a clear competivie edge. As more businesses digitally transform operations, UiPath’s addressable market appears massive.
UiPath counts over 60% of Fortune 500 companies as customers, showcasing its strong product-market fit. With room to expand within existing accounts and gain new customers worldwide, I see upside ahead. If PATH stock reaches a multiple of even 15-times sales (a quarter of its peak multiple), shares could double from here.
MDA Ltd. (MDALF)
MDA Ltd. (OTCMKTS:MDALF) is an under-the-radar space robotics play I’m bullish on. This company manufactures satellites, spacecraft parts, and robotics for space missions. Despite 5-year revenue growth projections of 17% annually, MDA trades at a low valuation around 1.8-times sales and below 30-times forward earnings.
As government and commercial opportunities in space ramp up, MDA is poised to benefit. Its space robotics and satellite divisions both have multi-billion dollar total addressable markets. MDA enjoys sticky customer relationships with long product cycles, giving it visibility into future revenue.
At current multiples, MDA stock prices in minimal growth, even though the space economy is just getting started. With strong secular tailwinds, I expect MDA to sustain double-digit growth for years to come. The risk/reward here looks compelling for long-term investors.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.