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Alarm.com (ALRM - Free Report) is a Zacks Rank #5 (Strong Sell) that offers interactive security solutions for both home and business owners. The company offers systems which include images sensors, crash and smash protection, web control, mobile access and video monitoring.
Here is how the company describes itself:
We create innovative technology that deepens the connection between people and the things they care about most – their families, homes and businesses. Millions of people trust Alarm.com every day for better security, intelligent automation and dependable service.
The stock has posted big returns over the last six months, moving almost 100% from the October lows. Investors now need to decide if there is momentum yet to come, or if its time to ring the register.
More about ALRM
Alarm.com was founded in 2000, is headquartered in Tysons, Virginia and employs over 1,400. The company is valued just under $5 billion and has a PE of 57. ALRM has Zacks Style Scores of “B” in both Momentum and Growth, but an “F” in value. Clearly with that high PE, valuation levels are elevated.
Earnings History
There was a good reason for the stock to run higher. The company hasn’t missed on earnings expectations since becoming public. That is fairly impressive and only recently have investors started to jump on board this momentum.
The last two quarters saw earnings beats of over 50% the expected number. These were the biggest surprises since 2017, which is a big part of the reason the stock doubled over this time.
However, the big question is if this can continue going forward and can the upcoming earnings justify this valuation.
Q4 Earnings and Estimates
The company reported earnings back in February seeing a 67% beat on the bottom line. Revenue came in above expectations and FY21 guidance was raised to $1.61-1.72 v the $1.60. SaaS revenues came in $105.5M v the $90.1M y/y and adjusted EBITDA came in at $32.4M v the $30.0M a year ago.
You would think estimates would be headed higher on these numbers, but they really haven’t budged much. Over the last 90 days, the current quarter has been flat. For the current year, estimates have gone up from $1.60 to $1.66 over that same time frame. You would expect more than 3% uptick from a company with such a high valuation and increase in its stock price.
A Valuation Issue
No doubt the earnings numbers are impressive, but the stock had little reaction as investors are worried about that valuation. Going forward, earnings numbers must keep exceeding expectations or the stock could see a serious correction.
The Technicals
The stock has recovered back above the 50-day that was broken since EPS. This is a positive sign, but could be attributed to overall market strength. If the stock were to fall back above that 50-day, which is currently at $90, the previous lows could come quick. This would likely force a test of the 200-day MA at $77.
In Summary
Late last year, I wrote a Bull of the Day on this stock and we have doubled since. The business is fine, but the valuation is one that investors should take pause at. The stock is 13% off its recent highs, but we could see some more downside in the near future.
Earnings are due up on May 4th and until then investors might want to look at Resideo Technologies (REZI - Free Report) . This stock is also in Security and Safety Services, but is a Zacks Rank #1 (Strong Buy).
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
Bear of the Day: Alarm.com (ALRM)
Alarm.com (ALRM - Free Report) is a Zacks Rank #5 (Strong Sell) that offers interactive security solutions for both home and business owners. The company offers systems which include images sensors, crash and smash protection, web control, mobile access and video monitoring.
Here is how the company describes itself:
We create innovative technology that deepens the connection between people and the things they care about most – their families, homes and businesses. Millions of people trust Alarm.com every day for better security, intelligent automation and dependable service.
The stock has posted big returns over the last six months, moving almost 100% from the October lows. Investors now need to decide if there is momentum yet to come, or if its time to ring the register.
More about ALRM
Alarm.com was founded in 2000, is headquartered in Tysons, Virginia and employs over 1,400. The company is valued just under $5 billion and has a PE of 57. ALRM has Zacks Style Scores of “B” in both Momentum and Growth, but an “F” in value. Clearly with that high PE, valuation levels are elevated.
Earnings History
There was a good reason for the stock to run higher. The company hasn’t missed on earnings expectations since becoming public. That is fairly impressive and only recently have investors started to jump on board this momentum.
The last two quarters saw earnings beats of over 50% the expected number. These were the biggest surprises since 2017, which is a big part of the reason the stock doubled over this time.
However, the big question is if this can continue going forward and can the upcoming earnings justify this valuation.
Q4 Earnings and Estimates
The company reported earnings back in February seeing a 67% beat on the bottom line. Revenue came in above expectations and FY21 guidance was raised to $1.61-1.72 v the $1.60. SaaS revenues came in $105.5M v the $90.1M y/y and adjusted EBITDA came in at $32.4M v the $30.0M a year ago.
You would think estimates would be headed higher on these numbers, but they really haven’t budged much. Over the last 90 days, the current quarter has been flat. For the current year, estimates have gone up from $1.60 to $1.66 over that same time frame. You would expect more than 3% uptick from a company with such a high valuation and increase in its stock price.
A Valuation Issue
No doubt the earnings numbers are impressive, but the stock had little reaction as investors are worried about that valuation. Going forward, earnings numbers must keep exceeding expectations or the stock could see a serious correction.
The Technicals
The stock has recovered back above the 50-day that was broken since EPS. This is a positive sign, but could be attributed to overall market strength. If the stock were to fall back above that 50-day, which is currently at $90, the previous lows could come quick. This would likely force a test of the 200-day MA at $77.
In Summary
Late last year, I wrote a Bull of the Day on this stock and we have doubled since. The business is fine, but the valuation is one that investors should take pause at. The stock is 13% off its recent highs, but we could see some more downside in the near future.
Earnings are due up on May 4th and until then investors might want to look at Resideo Technologies (REZI - Free Report) . This stock is also in Security and Safety Services, but is a Zacks Rank #1 (Strong Buy).
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
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