Arlo Company Notes

AncientGeek — Thu, 25 Jul 2019 11:44:03 GMT

I was reading a Killinger’s article today and saw this as the first stock covered. This is of interest/concern to all of us with (or considering) major investments in a Arlo Products.

Kiplingers

13 Stocks to Sell Before They Dive Even More | Slide 2 of 14

Arlo Technologies

MARKET VALUE: $302.2 million

SIX-MONTH PERFORMANCE: -46%

Arlo Technologies (ARLO, $4.04) develops products for smart homes such as security cameras, advanced baby monitors and smart security lights and recently introduced a doorbell product with integrated video. It spun off from its former parent Netgear (NTGR) and completed its IPO last August at $16 per share.

At the time of its offering, Raymond James analyst Madison Suhr rated ARLO at Market Perform (equivalent of Hold). He chalked that up to significant competition in the home security market, though he thought the company’s products had some key differentiators. Bank of America’s Nat Schindler started coverage at Neutral over concerns about competition from Amazon.com (AMZN) and Google parent Alphabet (GOOGL), as well as limited visibility into how Arlo would grow its subscription business.

However, ARLO shares lost almost half their value in a day in early February after management warned of weak 2019 results. The market’s growth slowed significantly in late 2018, leading to inventory buildups for Arlo and reduced 2019 growth expectations. The company eked out only 3.6% sales growth in the December quarter, partially due to the delayed launch of its new Arlo Ultra camera until after the holiday shopping season. Arlo’s revised 2019 guidance looks for sales well below analyst estimates and operating losses nearly double last year.

The company’s shares did rebound in April after better-than-expected March-quarter results. But they cleared a very low bar. Revenues fell almost 43% year-over-year. Operating losses swelled seven-fold.

The most recent analyst updates on ARLO stock came in February. Cowen analyst Jeffrey Osborne reduced his rating to Market Perform and dropped his price target from $25 per share to $7.50. He wrote that the challenging macro environment would produce further inventory buildup, and that Arlo’s heavy promotional spending would continue to materially impact margins. BofA’s Nat Schindler downgraded from Neutral to Underperform with a $5 price target.

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Arlo Company Notes