Alarm.Com Shows Strong SaaS Growth Potential, Analyst Sees 12% Upside

Roth MKM analyst Darren Aftahi reiterated a Buy rating on Alarm.Com Holdings, Inc. ALRM, raising the price target to $67 from $61.

Aftahi conducted a Mid-Q survey, and the results suggest a 170 bps upside to the analyst's core SaaS growth estimate of 5.6%, which implies ~12.3% y/y growth (excluding Vivint revenue from last year).

ALRM has reported "core" and overall 1H23 SaaS growth of 13.4% and 14.1%, respectively, the analyst notes.

In the survey, sales of video peripheral systems (video doorbells, video cameras, etc.) continue to show slowing y/y growth, the analyst notes. 

Surveyed responses were categorically more bullish on growth and prospects. The range of growth seen was ~19-36%, with the average around 26%, the analyst adds. 

Respondents suggested that video peripheral products have been up in 3Q23 between 0-2% y/y (down from 2Q survey levels). 

Availability of hardware remained consistent throughout the quarter, the analyst adds.

The analyst's checks also have minor data on Commercial, which appears to still be growing in the 20%+ range, with a view this trend could continue, the analyst adds.

For FY23, the analyst expects revenues of $876.5 million, with EPS of $1.70.

For FY24, the analyst projects revenues of $929.4 million, with EPS of $1.76.

Price Action: ALRM shares are trading lower by 0.15% to $59.85 on the last check Tuesday.