Imperial Downgrades Alarm.com From Outperform To In-Line

Shares of AlarmCom Hldg Inc ALRM have surged almost 50 percent year-to-date. Imperial Capital’s Jeff Kessler downgraded the rating for the company from Outperform to In-line, while maintaining a price target of $24.50. The analyst commented that the shares have surpassed the price target and reached a new 52-week high.

Analyst Jeff Kessler mentioned that Alarm.com continues to possess:

• A “wide competitive moat”
• Benefits from macro-factors that are driving the home automation market
• Technology advantages, such as its 4G LTE capability with Verizon
• Robust international growth of its competitors
• Potential in mobile healthcare and other businesses over the next couple of years
• Industry-leading customer service and dealer training

“Nonetheless, the shares have risen to a level of fair valuation, in our view,” Kessler wrote. He added that the price target is now 2 percent below the current price.

End User Subscription Growth

Kessler highlighted that Alarm.com’s priorities in end user subscription growth, which has decelerated to low teens from mid-teens a year ago, is mainly due to:

• The company’s focus on getting more profitable upgraded from its existing customers, which contributed the majority of revenue growth
• The relatively slow growth of its largest client, Monitronics
• “The potential boost from its new burgeoning international business, which is beginning to reach critical mass”