Editor's Note: Our Technology analyst Ami Joseph added Alarm.com (ALRM) as a best short idea on 10/4/18. Shares were trading around $55 at the time. Shares are down significantly trading around $46 today after earnings reported.
As Joseph wrote this morning:
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"ALRM SaaS revenue decelerated again on both absolute and relative terms. This was a critical quarter for ALRM as Bulls had tried to pound the table into the quarter and scare Shorts out of the way." |
Below is what Joseph wrote on 8/9 outlining his concerns about the company.
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Alarm.com deserves some credit for managing their “other” businesses well and for acquiring a good video analytics company to sell add-on video content. BUT, management will tell you that investing in ALRM is investing in a massive smart home/smart security adoption curve. That is not what you are buying here. What you are buying here is a company which provides software to the traditional home security companies and is ultimately dependent on their market rate of growth. The fact that ALRM is decelerating is not an isolated rough patch, it is structural, and it will continue. Analysts continue to ask about when the “inflection” in international and commercial will come and save the day. Keep asking, keep waiting, we’ll keep shorting. We see 30-40% downside risk in shares of ALRM. |
If you are an institutional investor interested in accessing Ami's research email sales@hedgeye.com.