Alarm com Holdings IncALRM61,07 $
Today we have a moderately speculative idea.: take the shares of the supplier of services and goods to protect the property of the Alarm.com (NASDAQ: ALRM), in order to make money on the deterioration of the criminal situation in the United States.
Growth potential and validity: 22,5% behind 15 Months; 45,5% behind 3 of the year; 180% behind 8 years.
Why stocks can go up: because, as Plato said, "every city, in fact, consists of two cities - the city of the rich and the city of the poor, – and both cities are at war with each other.”.
How do we act: we take shares now by 61,10 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
We have already published a successful idea for this company, and it details her business, so we won't repeat ourselves here.. Key to our history: 61% the company's revenue comes from cloud software and related services, rest 39% — sale of devices. The company specializes in home and property security solutions..
Arguments in favor of the company
Fell down. Company shares for the past 4 months have fallen: with 89 $ in November 2021 until 61,10 $ Right away. The reason for such a strong fall in stocks, of course, became their high cost. But there is hope, that the strengths of the company's business will lead to an influx of investors in its shares and a rebound in quotes.
More South Africa. The main driver for Alarm.com is the same, as before: rise in crime in the United States. More and more murders, and more Americans see crime as a big problem.
Given the tremendous changes in domestic American discourse in 2020, which had a demoralizing effect on law enforcement, i would expect, that demand for security services from the private sector will increase. Actually, according to the financial indicators of Alarm.com, you could already see this.
There will still be time, when the security business starts to be perceived by investors as a sector that is just as promising, like some cloud computing.
A little. The company has a capitalization of around 3.06 billion, which makes its quotes extremely susceptible to the influx of investors and positive news.
Living within their means. More than enough money in the company's accounts, to close all her debts. It's good, because in an era of higher rates and more expensive loans, investors will be critical of issuers with excessively large debts.
Can buy. The further, the more likely I see the purchase of the company by some large enterprise, developing the smart home segment. For example, Google. The main multipliers of the company look albeit high, but, basically, not outrageously overpriced: P / S — 4,21 and P / E — 60,67. And the capitalization of the company is not very large.
But even if they don't buy it, then they can enter into a strategic partnership with it, which will make quotes rise seriously.
What can get in the way
Price. And yet P / S and P / E companies are big enough, looking at the market average. And this will make its quotes very volatile. Especially if it does not fit into the expectations of analysts in terms of revenue and profit.
Iron. Logistics, now tormenting the entire corporate sector, may lead to lower sales and margins in the Alarm.com device segment. This should be borne in mind.
What's the bottom line?
Take shares now at a price 61,10 $. Then there are three options:
- wait until they grow 75 $. Think, given all the positive aspects, we can wait for this 15 Months;
- wait for stocks to return to level 89 $. Here it is better to rely on 3 years of waiting;
- if the last time you took stocks with an eye on the long term, now you can buy them.
Also don't forget, that the idea is volatile and it is not worth investing in these stocks, if you're not ready for it, that they will be shaken.
