By:
Alex Czachor, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Control4 Corp. (NASDAQ: CTRL) is a provider of smart home and business solutions in which provide
consumers with the ability to integrate audio, video, lighting, temperature,
security, communications, network management and other functionalities into a
unified automation solution.
• Currently CTRL has
about 300k homes within its customer base primarily targeting the high-end
housing market. Of the 14.2 million
homes with disposable incomes greater than $150k, CTRL currently holds
approximately 2% of the total market.
• The company is also well
positioned within a growing market.
According to Zion Market Research, the global smart home market was
valued at 24.10bn in 2016 and is expected to reach 53.45bn in 2022, representing
a 14.5% CAGR between 2017 and 2022.
• Strategic partnerships
such as the one with Amazon could fuel huge growth for CTRL in the near
term. CTRL products are already
integrated with Amazon’s Echo, Dot, and FireTV.
• Just recently the company
was named for the third year in a row as the top home automation provider
according to CE Pro’s Top 100 Brand Analysis report cementing them as a clear
leader within the market.
Key
points: As disruptive technology
continues to grow and advance within the global market, CTRL is right there
growing with it. The company is working
to completely change the home owning experience through connecting virtually
anything home related into a central management system. With increased convenience and simplicity
smart homes will be the future of homes for builders, with the smart home
market forecasted to grow at a 14.5% CAGR through 2022.
CTRL
has benefited from this strong industry trend and will continue to benefit as
it is a clear leader within the home automation market. Additionally, the company has made key
strategic partnerships with companies such as Amazon, in which CTRL’s platform
is already integrated in products like the Echo, Dot, and FireTV. This helps to improve confidence that the
company has a great avenue for expansion into the future.
As
mentioned before the company primarily focuses on the high-end market which can
be considered homeowners with above $150k in disposable income, which makes up
approximately 14 million homes. This
represents just under 2% penetration into this market, giving the company a
large runway in an industry that is likely to grow rapidly over the next
decade.
Another
key point to bring up is in regards to the company’s financial standings. Financially the company is debt free and
recorded approximately $210 million in revenues last year. Due to the low cost aspect of the business
the company enjoys gross margins around 50% which helps benefit the bottom
line. With the excess cash being
generated management has noted that they will be reinvesting aggressively into
new products and potential strategic acquisitions moving forward. The company is well positioned financially to
expand and grow penetrating the large addressable market even further.
What
has the stock done lately?
Since the company’s Q3
earnings report at the beginning of November the share price has appreciated
approximately ~23%. Primarily driven by
a better than expected quarter in regards to both top line and EPS
performance. Due to this strong
performance management raised its FY17 guidance for both revenue and EPS. The company now expects revenue in the range
of $242.5-244.5mn up $3mn from prior guidance.
Additionally EPS guidance was increased approximately $.10 to a range of
$1.13-1.16 in comparison to prior guidance.
Past
Year Performance: Year-to-date the company’s share price has
appreciated ~208% with the AIM fund capitalizing on approximately 117% of this
growth since its inception on February 24th 2017. During the year the company witnessed a 52
week price range between $10.08 and $34.73.
My
Takeaway:
As smart home technology
continues to gain traction and grow CTRL will likely benefit as it is a leading
player within the home automation market.
Additionally with strategic partnerships such as with Amazon, it is
likely that the company continue to expand and see huge growth as the demand
for products such as the Echo or FireTV continue to strengthen. Since its inception into the AIM portfolio
the company’s share price has appreciated approximately 117% and is currently
one of the top ten performers within the AIM small cap fund. Due to the strong likelihood that the smart
home market will continue to grow coupled with CTRL’s strong position within
the market as well as its commitment to innovation and its ability to expand
through inorganic means it is recommended that the AIM small cap equity fund
continue to hold Control4 (ticker: CTRL) as there continues to be strong
opportunity for growth.
