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5 Stocks to Make the Most of Smart Home Market Growth

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In the past few years, there has been a gradual shift toward a cleaner, more distributed and efficient energy ecosystem. People are more willing to manage and maintain their own micro-climate at home. What makes things more convenient? The decreasing cost of technology has made smart home tech more affordable, allowing homeowners a more convenient environment to spend time in.

Home Security and Automation Picks up

Before discussing further, let’s clarify a major doubt, what makes smart home technology important? Conservation of resources, wellness, usability, entertainment and security has made smart home products important and attractive. For instance, it ensures owners save electricity and reduce power and water bills, creating an optimal or comfortable ecosystem indoors while keeping outside environmental conditions in consideration.

While the concept is not new, the smart home space has plenty of room to grow in the United States. In fact, the smart home market finished 2020 on a strong note despite the pandemic. Shares of pure-play smart home companies like Alarm.com Holdings, Inc. (ALRM - Free Report) and Vivint Smart Home, Inc. (VVNT - Free Report) jumped more than 100% and other companies averaged a 35% gain in 2020.

A major reason behind the dramatic growth in smart home technology is people reconnecting with their homes during the pandemic. Staying at home has encouraged many to opt for restoration, renovation and look for ways to make their homes more energy-efficient. From security cameras to video doorbells, smart locks, motion detectors and thermostats, lighting and garage door openers, sales of all items picked up last year. Parents can easily work from home and monitor the front door, kids in the garden, and control electronic devices from their computers, tablets, or smartphones. In fact, to reduce the risk of getting contaminated/infected, homeowners can easily communicate with delivery agents directing them to leave packages in a convenient place.

Per NPD’s Connected Intelligence report, half of American consumers own at least one smart home device, up 35% since the beginning of 2020. The report reveals that the largest sales gains were seen in security systems, smart garage door openers, and smart lighting that rose 44%, 21% and 19%, respectively, in 2020.

Energy Efficiency Spending Set to Rise

The need for home automation is increasing by leaps and bounds on low energy consumption, which eventually leads to lesser household expenses and reduced carbon footprint. Moreover, the present government is focusing on increasing spending on energy-efficient buildings and homes.

President Joe Biden has set a target to achieve net-zero emissions by no later than 2050 and plans to upgrade 4 million buildings and weatherize 2 million homes over the next four years. In this process, the government shall retrofit and opt for an efficient-appliance manufacturing supply chain, and allow funding by providing direct cash rebates and low-cost financing to upgrade and electrify home appliances and install more efficient windows, which in turn will cut residential energy bills.

According to a Fortune Business Insights report, the global smart home market size stood at $79.9 billion in 2018 and is expected to reach $622.59 billion in 2026, at a CAGR of 29.3%.

5 Stocks to Watch

While America races to achieve net-zero emission, homeowners need to focus on converting their existing homes to more energy efficient ecosystems. Smart homes are designed to make the most of available energy and decrease overall household energy consumption. Hence, increasing adoption of smart home technologies will constantly boost the space. We have, thus, selected five stocks that can gain from the recent uptick in demand for such technologies.

Alphabet Inc. (GOOGL - Free Report) offers Google Home and Alexa which can be used to control home environment with simple voice commands. The company's expected earnings growth rate for the current year is nearly 50% compared with the Zacks Internet - Services industry’s projected earnings growth of 4.7%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 27.3% upward over the past 60 days. Google flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Johnson Controls International plc (JCI - Free Report) designs, sells, installs, and services heating, ventilating, air conditioning, controls, refrigeration, integrated electronic security, energy efficiency solutions and more. The company's expected earnings growth rate for the current year is 17.4% compared with the Zacks Security and Safety Services industry’s projected earnings growth of 11.4%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 3.5% upward over the past 60 days. Johnson Controls sports a Zacks Rank # 2 (Buy).

Honeywell International Inc. (HON - Free Report) operates as a diversified technology and manufacturing company. The company also offers automated home solutions and has merged with Intel to develop advanced security platform for home solutions since April 2019. The company's expected earnings growth rate for the current quarter is 51.6% compared with the Zacks Diversified Operations industry’s projected earnings growth of 24.2%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 1.7% upward over the past 60 days. Honeywell carries a Zacks Rank #3 (Hold).

Alarm.com Holdings provides interactive security solutions to control and monitor security systems. This Zacks Rank #3 company that belongs to the Zacks Security and Safety Services industry has an expected earnings growth rate of 10.8% for the next year. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 1.2% upward over the past 60 days.

Resideo Technologies, Inc. (REZI - Free Report) develops, manufactures, and sells comfort, residential thermal, and security solutions to the commercial and residential end markets. The company's expected earnings growth rate for the current year is 66.9% compared with the Zacks Security and Safety Services industry’s projected earnings growth of 11.4%. The Zacks Consensus Estimate for the company’s current-quarter earnings has been revised 23.4% upward over the past 90 days. Resideo carries a Zacks Rank #3.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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