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Alarm.com: 4 Reasons Why Imperial Capital Turned Bullish

Jayson Derrick

AlarmCom Hldg Inc (NASDAQ: ALRM), a cloud-based security provider, is scheduled to report its fourth-quarter results on Feb. 27. 

The Analyst

Imperial Capital's Jeff Kessler upgraded Alarm.com Holdings' stock rating from In-Line to Outperform with an unchanged $45 price target.

The Thesis

The case for owning Alarm.com's stock is fourfold, Kessler said in a research report:

  • Expectations for 25-percent year-over-year growth from the SaaS and license segment.
  • Expectations for growth of over 20 percent in hardware and other segment sales.
  • The "increasingly strong" revenue growth from non-core security services like HVAC, which is up more than 100 percent year-over-year.
  • The company's competitive positioning within the automation industry.

Alarm.com's strategy to grow its user base is four-pronged, the analyst said:

  • Selling more profitable upgrades to existing customers.
  • A slow but increasing exposure to its largest clients, including ADT.
  • A focus on the international market, which is "beginning to reach critical mass." 
  • Potential growth from utilities, vacation homes and long-term health care.

Finally, the recently passed tax reform will benefit Alarm.com, as the corporate tax rate should drop from 36 percent to 26 percent, which alone adds 12 cents per share in EPS power, according to Imperial Capital. 

Price Action

Shares of Alarm.com were trading flat early Friday morning.

Related Links:

AlarmCom Is A Rare Home Automation, IoT Play, Jefferies Says In Upgrade

Weakness In Alarm.com Shares Partly Due To Apple HomeKit News

Photo courtesy of Alarm.com.

Latest Ratings for ALRM

Date Firm Action From To
Feb 2018 Imperial Capital Upgrades In-Line Outperform
Jan 2018 Jefferies Upgrades Hold Buy
Nov 2017 Credit Suisse Maintains Outperform

View More Analyst Ratings for ALRM
View the Latest Analyst Ratings

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