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Bear of the Day: ADT Inc (ADT)

David Borun

Home Security is one of those things that we know is necessary, but don’t really like to think about.

You know that in an uncertain and sometimes dangerous world, you need to protect your family, home and belongings. Until fairly recently that meant hiring a security company to install equipment in your home and then also paying them to monitor the signals from that equipment and alert you and/or the appropriate authorities when there was a problem.

It was a great business – they got to sell you the original equipment and then also collect fees for the monitoring services on a continuing basis. Though there were plenty of local firms that could do that, there was one undisputed national leader in the business – ADT Inc. (ADT).

The "internet of things" has changed that.

Starting with what were essentially just “smart” doorbells that allowed customers to see who was coming to the door, home security options have now expanded into a vast universe of interconnected products that provide security services - but also allow you to control locks, lights, garage doors, climate control systems, and even items like pet food dispensers – and all from a smartphone.

There are choices for every level of customer, from basic DIY components that you can purchase and install yourself, to professional-quality total automation systems. Most of them are also modular, meaning you can start with a basic setup and then add components as needed that are basically plug-and-play.

If you want professional monitoring, that will still cost money of course, but in most cases, it’s much less expensive than ADT. SimpliSafe charges $14.99/month. Nest is $29/month, but that drops to $19 if you commit to a three-year contract, and Ring’s Protect Plus is only $10/month.

ADT Pulse starts at $28.99/month (with a three-year contract) and can easily grow to $60 with added features.

(Note: The above prices are from a February 2019 survey by PCMag.com and may have changed.)

So where does all this leave ADT? Let’s let the numbers do the talking.

Here is the reported history for ADT for the past four quarters:

Ouch.

And here’s the agreement of analyst revisions in the past 60 days and the magnitude of those revisions:

Pretty ugly. That’s Zacks Rank #5 (Strong Sell) material.

Home security and automation is becoming a crowded industry and that’s great news for homeowners who have more options than ever for keeping the people and things that are dear to them safe, but it’s bad news for ADT.

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