Arlo Technologies (ARLO, Financial) faces a fresh competitor in the security camera market as Roku (ROKU) recently unveiled its first independent lineup of cameras. Previously, Roku collaborated with Wyze for smart home products. Despite this new entry, analyst Hamed Khorsand from BWS Financial predicts minimal disruption for Arlo, citing the company's strategy of pricing hardware below cost. This approach could deter significant market share loss to Roku.
Arlo demonstrated strong sales momentum in the first quarter, contrary to typical post-holiday seasonal declines. BWS Financial maintains a Buy rating for Arlo, with a target price set at $24 per share, emphasizing confidence in Arlo's market position despite increased competition.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 4 analysts, the average target price for Arlo Technologies Inc (ARLO, Financial) is $19.50 with a high estimate of $24.00 and a low estimate of $15.00. The average target implies an upside of 103.13% from the current price of $9.60. More detailed estimate data can be found on the Arlo Technologies Inc (ARLO) Forecast page.
Based on the consensus recommendation from 5 brokerage firms, Arlo Technologies Inc's (ARLO, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Arlo Technologies Inc (ARLO, Financial) in one year is $9.24, suggesting a downside of 3.75% from the current price of $9.6. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Arlo Technologies Inc (ARLO) Summary page.
ARLO Key Business Developments
Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arlo Technologies Inc (ARLO, Financial) achieved significant growth in its subscription business, with annual recurring revenue (ARR) surpassing $250 million, growing over 20% year-over-year.
- The company reported a gross margin on service revenue above 80%, highlighting the efficiency and profitability of its subscription model.
- Arlo Technologies Inc (ARLO) has nearly 11 million registered accounts and over 4.5 million paid subscribers, demonstrating strong customer acquisition and retention.
- The company is expanding its product lineup with the largest device launch in its history, expected to drive further growth and increase shelf space at major retailers.
- Arlo Technologies Inc (ARLO) has formed strategic partnerships, such as with Rapid SOS and Origin Wireless, to enhance its service offerings and expand its market reach.
Negative Points
- The cost of customer acquisition increased from $100 to $200 in 2024, impacting profitability despite strong subscription growth.
- Product revenue declined by $22.1 million compared to the prior year, reflecting challenges in the hardware segment.
- Aggressive promotional activities in Q4 2024 led to decreased average selling prices (ASPs) and a decline in product gross margins.
- The company anticipates a potential temporary increase in churn due to the transition of subscribers to new service plans.
- Despite strong performance, Arlo Technologies Inc (ARLO) trades at a lower revenue multiple compared to peers, suggesting that its market value may not fully reflect its growth potential.
