Why Alarm.com (ALRM) Stock Is Up Today

Radek Strnad /
2023/08/10 11:00 am EDT

What Happened:

Shares of home security and automation software provider Alarm.com (NASDAQ:ALRM) jumped 6.22% in the morning session after the company reported a "beat and raise" quarter. Second quarter results blew past analysts' estimates for revenue, adjusted EBITDA and earnings per share. Cash flow also turned positive, a significant improvement compared to the cash burn experienced in the previous quarter. In addition, full-year revenue and adjusted EBITDA guidance (both of which were raised from the full year outlook provided last quarter), came in higher than Wall Street's estimates. On the other hand, its gross margin declined. 

To continue to power growth, the company is also releasing new products. As an example, in July 2023, it announced the launch of Gopher Info, an AI-powered assistant for technicians and service providers that uses large language models to improve efficiency and operations. Using Gopher, technicians can query Alarm.com's proprietary Knowledge Base and efficiently troubleshoot intricate issues during installation and repair processes. 

Overall, it was a positive quarter for the company leaving investors with ample reasons to cheer.

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What is the market telling us:

Alarm.com's shares are not very volatile than the market average and over the last year have had only 5 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The previous big move was three months ago, when the stock gained 7.96% on the news that the company reported a "beat and raise" quarter. First-quarter results exceeded analysts' expectations for revenue, adjusted EBITDA, and earnings per share (EPS). While the topline growth remained muted on an absolute basis, the SaaS and license division led the charge, driving reported double-digit growth in the mid-teens, excluding the Vivint license income from Q1 2022. However, the company recorded a cash burn, as free cash flow turned negative. Despite this, guidance for revenue and adjusted EBITDA were raised for the full year, with both metrics in line with Consensus. 

The overall results were positive, considering the improved outlook and the strength of the SaaS and license segment, which continued to account for a bigger share of total revenue.

Alarm.com is up 18% since the beginning of the year, but at $58.02 per share it is still trading 24.4% below its 52-week high of $76.79 from August 2022. Investors who bought $1,000 worth of Alarm.com's shares 5 years ago would now be looking at an investment worth $1,160.

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