The Improving Rental Market Means Opportunities for SmartRent Inc
When the COVID-19 pandemic surfaced in early 2020, it was devastating for the economy. One of the hardest-hit areas was the real estate market, both commercial and residential. The view was that many tenants wouldn’t be able to pay their rents as businesses were closed and tens of millions of people were out of work.
There was a massive selling of real estate stocks to the point where they were trading as if the companies were in default. But that wasn’t the case, and investors who bought dirt-cheap real estate stocks at the time are now sitting on significant gains.
Fast-forward two years and the real estate market is booming with higher selling prices and rents. An interesting play on the real estate market from a technology angle is SmartRent Inc (NYSE:SMRT).
The company provides software and hardware to improve property management efficiency and drive revenues. SmartRent Inc’s target market comprises residential property owners and managers, home builders, home buyers, and residential tenants.
One study estimates that the global property management software market will grow to $4.9 billion in revenue in 2030. (Source: “Property Management Software Market Size, Share & Trends Analysis Report,” Grand View Research, Inc., last accessed April 7, 2022.)
SMRT Stock Looks Compelling After Sell-Off
Despite the recovery and bullish tailwinds in the real estate market, SmartRent stock has been crushed since trading at $15.14 on its initial day of trading on August 25, 2021.
The selling has been excessive, with SMRT stock down by a whopping 52% this year to a low of $4.57 on April 6. For the contrarian investor, I view the selling as a strong risk/reward opportunity.
While shares of SmartRent Inc could continue to move lower due to the stock’s lack of a historical support level, investors with risk capital and a willingness to assume risk could get significant returns.
Take a look at the SmartRent stock chart below.
Shares of SmartRent Inc plummeted after the surfacing of a death cross pattern in December 2021. A death cross is a bearish technical crossover pattern that appears when the 50-day moving average breaks below the 200-day moving average.
SMRT stock has been steadily declining since its death cross. During the downtrend, SmartRent Inc’s relative strength was weak, with only a few instances of it rising above neutral.
SmartRent stock hasn’t been at a bullish level since November 2021. We need to see the relative strength improve for the stock to attempt any comeback. At this point, the relative strength is oversold, so there could be a setup for shares of SmartRent Inc to bounce.
Chart courtesy of StockCharts.com
The money flow index at the bottom of the above chart (the section marked “MFI”) shows SMRT stock moving toward an oversold condition. In previous cases that this occurred, shares of SmartRent Inc rallied.
Assuming SmartRent stock is near a bottom, the upside potential is significant. The first line of attack is the 50-day moving average at $6.82, representing a 44% return.
Above this are the Fibonacci retracement levels (horizontal blue lines on the above chart) at $8.28, $9.42, and $10.58.
The strong tailwinds in the real estate sector could propel the demand for technological solutions. SmartRent Inc could benefit from this and, given the sell-off of SMRT stock, I like the risk/reward opportunity for contrarian traders.