Our Technology analyst Ami Joseph is hosting a call on Tuesday 11/19 at 12:30pm ET for a key update to our Alarm.com short thesis. If you are an institutional investor interested in accessing this call or related research please email email@example.com.
In October 2018, we articulated our SHORT thesis on ALRM:
1) structural deceleration of growth
2) paucity of FCF model
Next week we will refresh, extend, and re-validate these thesis points and address an entirely new trove of questions (below) as well as respond to the pushback we have received over the last year.
Our original fundamental views have been correct so far, but the stock still reflects enormous hope of sustaining either a much-improved growth rate or a pivot to far higher FCF production levels.
As part of the previous effort, we called out ALRM’s lack of speedy innovation curve by highlighting the sluggishness of new product announcements relative to fast-tech DiY peers. Maybe this part of our work deserves a grade of ‘Incomplete’ as product announcements are not the only way to measure engineering tenor. This time around we will take this work to the next step and show the areas where ALRM may in fact be leading in technology, and whether it's too little too late for that to matter.
Below are some of the key topics we will address with our new ALRM work:
- Answering the key question of “when does growth go negative?”
- Why there isn’t a natural acquirer
- Growth (and survival) of DiY and impact to ALRM
- Technological differentiation between ALRM and new competitors
- Segmenting SaaS-level growth drivers
- TAM, SAM and why we aren’t at the beginning of the smart home market opportunity
- Why Private Equity would lose on this transaction
- Why “non-ordinary” litigation is becoming more and more ordinary
- Large vs. Small – a breakdown of growth from ALRM’s biggest dealers and their smallest ones
- Valuation misconceptions
We don’t normally get loud on a heavily shorted stock after the call has largely worked. Consider this a special circumstance.