According to a report in SecurityToday.com, the future is looking very bright for companies with direct exposure to the Smart Home revolution. The report cites research by analyst firm Omdia that focuses on a shift in operational focus to move beyond traditional retail channels and step up the technology bar in the space to jump from “smart” to truly Smart as technological horizons continue to advance.
As a result of this new focus, the global smart home market – worth an estimated $60.8 billion in 2020 – is projected to exceed $178.5 billion in 2025, representing a CAGR of over 24% in that time, making it one of the fastest growing major markets on the planet over the next five years.
In terms of penetration, the report notes that Omdia estimates 19% of broadband households globally had a smart home device in 2020, up from 10% in 2017. That means the market has almost doubled in terms of penetration in just three years.
And one suspects this curve could accelerate because direct exposure is one of the primary channels – ie, people going over to other people’s homes and seeing their setups drives the growth, and that phenomenon would obviously happen more often if more homes were equipped with enviable smart home setups. In other words, it’s a self-reinforcing feedback loop up to a point of substantial market saturation, like a virus.
This powerful force is being augmented by the boom in the housing market as homebuilders start to equip original new homes with technology foundations meant to ease the installation of smart home ecosystems. Omdia estimates there were over a million new single-family homes built in 2020. Approximately 49k of them had smart home features installed during construction, equating to more than 600k smart home devices installed during the construction of homes in the US in 2020.
Consider this: In 2025, there will be about 13 million devices installed annually with new home construction in the US – a 2,000% increase in just 5 years!
With this in mind, we take a look at some of the most interesting opportunities in the space below and cover some of their recent catalysts.
AlarmCom Hldg Inc (NASDAQ:ALRM) is a core player in the smart home space. The company engages in the provision of wireless and web-enabled security system technology. The firm offers security, video monitoring, and energy management solutions. It operates through the Alarm.com and Other segments.
The Alarm.com segment represents cloud-based platform for the connected home and related connected home solutions. The Other segment focuses on the research and development of home and commercial automation, as well as energy management products and services.
AlarmCom Hldg Inc (NASDAQ:ALRM) recently reported financial results for its second quarter ended June 30, 2021, including news that SaaS and license revenue increased 18.3% to $113.2 million, compared to $95.7 million, total revenue increased 33.3% to $188.9 million, compared to $141.6 million, and GAAP net income attributable to common stockholders decreased to $14.7 million, or $0.28 per diluted share, compared to $17.0 million, or $0.34 per diluted share. Alarm.com also provided its financial outlook for SaaS and license revenue for the third quarter of 2021 and increased its guidance for the full year of 2021.
“We’re pleased to report solid results for the second quarter,” said Steve Trundle, President and CEO of Alarm.com. “Our service providers in North America continued to create new accounts with a rich set of advanced services such as video and video analytics for residential subscribers, and the small business and commercial market opportunities improved during the quarter.”
Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week. ALRM shares have been relatively flat over the past month of action, with very little net movement during that period.
AlarmCom Hldg Inc (NASDAQ:ALRM) managed to rope in revenues totaling $188.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 33.3%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($662.7M against $104.1M).
SPYR Technologies (OTC US:SPYR) is on this list because it seems extremely underappreciated as a player in this space upon some basic analysis.
The company provides accessory and ancillary products compatible with products designed by and for the Apple Inc (NASDAQ:AAPL) ecosystem of smart home technology. As such, SPYR’s Applied MagiX subsidiary isn’t actually competing with other smart home technology players. It is simply creating a niche as a leader in helping consumers make their smart home ecosystems work smoothly and easily. And, given the massive growth in this space, that’s a huge new niche, and SPYR might be one of its emerging leaders. So the stock probably deserves a closer look.
SPYR Technologies (OTC US:SPYR) isn’t a concept either. The company is currently shipping a wide range of products, including its MagixDrive Wireless CarPlay adapter, which allows users to access CarPlay wirelessly using an iPhone, its Homekit Secure Video Camera With iCloud Storage, a Multipurpose Sensor With Alarm, an Environment & Motion Sensor, and a Window & Door Contact Sensor. All of these products are designed to work seamlessly with Apple ecosystem smart home products.
However, this is only the first stage of the company’s commercialization vision. It is also working to identify and soup-up white-label products already on the market, reselling them as branded products, and also working toward eventually developing and selling its own line of smart home products based on its developed expertise selling in the space.
The company is led by its President and Chief Executive Officer, James R. Thompson. Thompson has a law degree and has been active in the legal profession in business law, real estate, and construction law. He is accompanied by Jennifer Duettra, who is Vice President and Assistant General Counsel after graduating from Harvard Law School in 2004. The heavy legal emphasis is also important here given the core important of avoiding IP issues as the business grows.
SPYR Technologies (OTC US:SPYR), through its Applied MagiX subsidiary, is carving out a strong niche in a rapidly growing space with already active commercial operations. That said, shares of the stock could be in the bargain basement right now as the market hasn’t yet caught onto the potential at play here. This one may be worth a closer look while it sits at such deep discount pricing.
ADT Inc (NYSE:ADT) is a smart home play in the home security space. The company has been a home security player for many years, but has recently reinvented itself to broaden its product integration potential to redefine that niche as a smart home concept for investors.
According to its materials, the company engages in the provision of security, automation, and smart home solutions. Its products include security panels, security cameras, ADT mobile application, and identity theft protection. The firm also offers home security systems, fire and life safety, smart home automation, security for renters, and multifamily solutions and services.
ADT Inc (NYSE:ADT) recently reported results for the second quarter of 2021, including news that gross recurring monthly revenue (RMR) additions grew 28%, end of period RMR of $352 million increased by 4%, and customer retention remained solid with attrition at 13.3%.
“We continue to make substantial progress against our key priorities for 2021, including growing our RMR additions and our recurring monthly revenue base, improving the performance of our Commercial business, and driving innovation both through our internal expertise and through our strategic partnerships. I want to thank our entire ADT team for serving our customers and delivering solid results for our shareholders,” stated Jim DeVries, ADT’s President and CEO. “From mobile to residential to commercial, the breadth and scope of service ADT provides is unmatched in the marketplace. We are well positioned to lead the way in the fast-growing markets for smart home and commercial protection, leveraging our trusted brand to drive profitable growth through premium services, innovative technology, and best-in-class partnerships.”
Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -4%.
ADT Inc (NYSE:ADT) managed to rope in revenues totaling $1.3B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -2%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($156.5M against $1.4B, respectively).
Other core smart home stocks that could see interest include Vivint Smart Home Inc (NYSE:VVNT), Honeywell International Inc (NASDAQ:HON), Resideo Technologies Inc (NYSE:REZI), and Alphabet Inc (NASDAQ:GOOG).
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