Monday, October 12, 2020

A Small Cap Equity holding: Holdings (ALRM, $60.66): “Alarmingly Strong” by Shant Poladian, AIM Student at Marquette University Holdings (ALRM, $60.66): “Alarmingly Strong”

By: Shant Poladian, 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.

• Holdings, Inc. (NASDAQ: ALRM) is the leading platform for intelligently connected properties, by offering a comprehensive suite of cloud-based solutions for smart residential and commercial properties. These solutions include interactive security, video monitoring, intelligent automation, energy management and wellness solutions.

• reported a mild 3% increase in EPS in the latest quarter, to 41 cents. Moreover, sales grew a healthy 16% to $141.6 million last quarter.

• Successful production and integration development of OpenEye, a provider of cloud-managed video surveillance solutions for the commercial market. 

• Increasing activity among institutional investors, including Fidelity Investments, Charles Schwab, numerous hedge funds, and others.

Key points: ALRM released its quarterly earnings data on Wednesday, August 5th. The software maker reported $0.41 EPS for the quarter, topping analysts' consensus estimates of $0.31 by $0.10. The company had revenue of $141.64 million during the quarter, compared to the consensus estimate of $119.06 million. ALRM had a net margin of 10.06% and a return on equity of 17.60%. Sell-side analysts forecast that ALRM will post 1.04 EPS for the current year.

OpenEye is designed to help enterprise-level commercial customers deploy expansive video recording capabilities, remote viewing, administration and diagnostic reporting. ALRM acquired OpenEye to expand commercial opportunities in the large enterprise and national accounts market share. Management has indicated that hardware gross margins have increased from 18.9% to 21.6% for the second quarter compared to last year, primarily due to the product mix and inclusion of OpenEye. Furthermore, OpenEye should aid ALRM in growing the $4.4 billion cloud services component of the video-based security market by 15% in 2022 as management has indicated.

ALRM was held by 24 hedge fund portfolios at the end of the second quarter of 2020, with Akre Capital Management holding the most valuable stake worth $115.7 million at the end of the third quarter. Bares Capital Management which amassed $29.8 million worth of shares. Moreover, Charles Schwab expanded upon its position in ALRM by 23.8% during the 2nd quarter. Charles Schwab currently owns 301,994 shares worth $19,573,000 after buying an additional 58,063 shares during the period. Fidelity Investments also expanded upon its position in ALRM by 49,454.5% during the 2nd quarter. Fidelity Investments now owns 81,765 shares worth $5,299,000 after buying an additional 81,600 shares during the period.

What has the stock done lately?

On October 9, 2020, ALRM closed at $60.54 per share, incurring a 1.44% gain. Following ALRM’s second quarter earnings results, the stock price has remained between $53.75-$63.25. ALRM has a 50-day moving average of $57.38 and a 200-day moving average of $54.37. 

Past Year Performance: Over the past year, ALRM reached a 52-week high at $74.66, and a 52-week low at $32.00. YTD, ALRM is up $14.82, or 32.41%. Over the past 6 months, ALRM is down $18.18, or 42.92%. 

Source: FactSet

My Takeaway

Millions of consumers and businesses depend on ALRM’s technology to manage and control their property from anywhere. ALRM’s platform integrates with a growing variety of Internet of Things (IoT) devices through our apps and interfaces. ALRM’s security, video, access control, intelligent automation, energy management, and wellness solutions are available through their network of thousands of professional service providers in North America and around the globe. With rapidly adopted solutions, and a strong integration with OpenEye, I believe ALRM represents a hold. 

Source: FactSet