Imperial Capital Upgrades Alarm.com Stock On Expectations Of Strong Growth In 2021

The various investments being planned in 2020 are likely to enable Alarm.com ALRM to generate strong growth and margins in 2021, according to Imperial Capital.

The Analyst

Imperial Capital’s Jeff Kessler upgraded Alarm.com from In-Line to Outperform and raised the price target from $51 to $57.

The Alarm.com Thesis

Alarm.com would likely return to double digit growth in both SaaS and hardware revenue and improve its operating expense ratio as heavy expenses related to research and development as well as sales and marketing begin declining in 2021, Kessler said in the note.

He added that the increase in investments in 2020 is likely to increase the company’s research and development sales to more than 24% of total revenues over the next few quarters.

Alarm.com is making several important investments and will be integrating and creating a SaaS platform for OpenEye, which is acquired in October 2019, the analyst mentioned. He believes that the acquisition would able Alarm.com to scale up its current video offerings from small-to-medium business to full-size enterprise solutions.

“We now have sufficient confidence to believe that these investments will result in returns to higher growth and EBITDA margins in 2021,” Kessler wrote

ALRM Price Action

Shares of Alarm.com were up 0.58% to $45.99 at time of publication.