On Thursday, Barclays (LON:BARC) made adjustments to its outlook on Alarm.com (NASDAQ:ALRM), a company specializing in cloud-based services for smart home and business security systems. The firm's analyst reduced the price target for Alarm.com to $72.00 from the previous $78.00 while maintaining an Equalweight rating on the stock.
The decision to adjust the price target comes ahead of Alarm.com's second quarter 2024 earnings. The analyst anticipates that the company will report approximately $154 million in total SaaS and License revenue, which would mark a year-over-year growth of about 10%. Despite this growth, there is an expectation of continued softness in hardware revenue, attributed to a slowdown in existing home sales. However, this could be somewhat offset by potentially higher renewal rates among existing subscribers.
For the second quarter, the analyst projects an EBITDA of around $38 million, or a margin of approximately 17%. This represents a sequential improvement from the first quarter, which was adversely affected by a roughly $4 million bad debt reserve. While the first quarter's results were impacted, there is a possibility of upside in the second quarter's figures. Looking further ahead, margins are expected to show a quarter-over-quarter improvement for the remainder of the year.
Alarm.com's emerging business segments, which account for 31% of SaaS and have seen a 26% year-over-year growth, will also be an area of focus for updates during the earnings call. Additionally, the company's strategies for capital allocation will be of interest, especially following the issuance of $425 million in 2.25% convertible senior notes in late May.
The revised price target of $72 is based on a ~20x multiple on the firm's forecasted FY25E EBITDA, a decrease from the previous 22x multiple. This change reflects the challenges faced by the hardware segment and the impact of slower existing home sales on the company's financial performance.
In other recent news, Alarm.com Holdings , Inc. disclosed plans for a private placement of $375 million in Convertible Senior Notes due 2029, with an additional option for purchasers to acquire an extra $56.25 million aggregate principal amount of notes. The proceeds will be used for various corporate activities, including financing capped call transactions, repurchasing up to $75 million of its common stock, and for potential acquisitions, strategic investments, and other stock repurchases.
Alarm.com also reported first-quarter results that surpassed expectations, with an 11% year-over-year growth in SaaS and license revenue to $150.3 million. The company has raised its full-year 2024 SaaS and license revenue forecast to $624.5 million to $625 million, and total revenue projection for the same year is now between $914.5 million to $931 million.
On the innovation front, Alarm.com unveiled new security technologies at the ISC West event, including the Remote Video Monitoring Console and an outdoor security drone solution in partnership with Sunflower Labs. These recent developments underscore Alarm.com's commitment to leveraging data from devices for growth, with a focus on AI and emerging products.
In terms of analyst notes, the company's strong growth in emerging products, international business, and continued innovation in AI were highlighted. However, no significant changes were observed in the ADT process. These updates provide a snapshot of recent developments at Alarm.com.
InvestingPro Insights
In light of Barclays' recent outlook adjustment on Alarm.com, a dive into the InvestingPro data and tips can provide additional context for investors. Alarm.com, with a market capitalization of $3.32 billion, is trading at a forward P/E ratio of 33.92, which indicates anticipation of earnings growth. This aligns with the company's revenue growth over the last twelve months as of Q1 2024, which was 5.72%, and a gross profit margin of 63.64%, showcasing its ability to maintain profitability.
One of the notable InvestingPro Tips highlights that Alarm.com holds more cash than debt on its balance sheet, suggesting a solid financial position that could weather economic uncertainties. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, which may appeal to value-oriented investors looking for growth potential at a reasonable price.
For those interested in further analysis, there are additional InvestingPro Tips available, including insights on Alarm.com's stock volatility and liquidity position. Subscribers can access these tips by visiting https://www.investing.com/pro/ALRM and can benefit from an exclusive offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With 11 additional tips listed on InvestingPro, investors have a wealth of information to guide their decisions regarding Alarm.com.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.