Alarm.com Stock: The Smart Home Stock With Double-Digit Upside

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ALRM Stock Posts Impressive Gains

Our gadgets are getting smarter, and so are our homes. With the rise of Internet of Things (IoT) technology, the home automation and remote security trend is on the rise.

With the touch of a button on our smartphones, we can now remotely control our door locks, video cameras, and other monitoring devices. We can get instant notifications when there is an unusual entry into our house, as detected by motion sensors.

This technology is becoming more secure and convenient. It’s no wonder that more and more U.S. households are opting for smart home devices. This market is getting bigger, and many players are getting into the fray in order to gain from it.

One such player is Alarm.com Holdings Inc (NASDAQ:ALRM). The company has a strong presence in the smart residential and commercial properties market. Through its cloud-based technology, it provides interactive security, intelligent automation, and energy management—among other smart home features.

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The company provides wireless and Web-enabled security systems for home security and automation. More than five million people have relied on its technology to secure and manage their properties. In the last year, the company’s platforms analyzed more than 100 billion data points generated by over 80 million connected devices.

As more residential and commercial property owners look to remotely manage their properties through smart home systems in the coming years, the company has a significant growth opportunity. This translates to more upside for ALRM stock.

According to a research report by MarketsandMarkets Research Private Ltd., the IoT security market is expected to touch about $29.0 billion by 2022, from $6.6 billion in 2017. This means there will be a compound annual growth rate (CAGR) of 34.4% between 2017 and 2022. (Source: “Internet of Things (IoT) Security Market…Global Forecast to 2022,” MarketsandMarkets Research Private Ltd., last accessed August 14, 2018.)

Alarm.com is well positioned to tap into this growing market opportunity. The scale of subscribers and connected devices makes the company a leader in the connected property market.

Moreover, the technology trends of increased mobile access, IoT, big data, and cloud technology will continue to build opportunities to connect people with their properties in new ways. This is a huge opportunity for Alarm.com stock.

The company has robust cloud service platforms for intelligently connected properties. With an established network of over 7,000 service providers, it has a wide reach as well.

Alarm.com derives its revenue from three primary sources: the sale of cloud-based software as a service (SaaS) on its integrated Alarm.com platform, the sale of licenses and services on the “Connect” software platform, and the sale of hardware products.

The company’s technology helps customers connect effortlessly to their property through a wide range of mobile apps, web sites, as well as new platforms like voice control through the “Amazon Echo” and wearable devices like the “Apple Watch.”

The smart home company has been posting phenomenal growth for the past few years. From a total revenue of $208.9 million in 2015, Alarm.com earned $338.9 million in 2017. The SaaS and license revenue reached $236.3 million in 2017 from $140.9 million in 2015, translating to a CAGR of 29.5%. (Source: “Alarm.com Reports Fourth Quarter and Full Year 2017 Results,” Alarm.com, February 27, 2018.)

And the financial performance continues to be impressive. In its second-quarter results announced last week, Alarm.com posted total revenue of $104.5 million, an increase of 21.5%. The SaaS and license revenue went up by 20.4% in the year to touch $71.0 million. (Source: “Alarm.com Reports Second Quarter 2018 Results,” Alarm.com, August 7, 2018.)

The company is optimistic about its future outlook and has increased its guidance for full-year 2018. ALRM stock has gotten a significant boost since then.

The company has also introduced its “Builder Program,” which strengthens partnerships between home builders and the company’s service provider partners. Through this program, a wide range of smart home solutions can be installed rapidly and efficiently.

The smart home market still has a long way to go, so a lot of growth is expected in the coming years. That bodes well for Alarm.com stock.

Since it made its public debut in 2015, ALRM stock’s price has almost tripled. Over the last year, it has gone up by about 20%.

The following stock chart shows Alarm.com’s impressive growth over the last three years.

Chart courtesy of StockCharts.com

Analyst Take

The market for connected property solutions is fragmented and highly competitive. It is also evolving constantly. There is no doubt that big and established players pose a tough challenge to Alarm.com.

However, the firm has been able to post impressive growth on account of its unique software platform and proven scalability. Given the way the company is executing its strategy, the future appears bright for Alarm.com stock.