Balanced Outlook for Alarm: Strong SaaS Growth Amidst Hardware Challenges and Cost Pressures

William Blair analyst Stephen Sheldon has maintained their neutral stance on ALRM stock, giving a Hold rating on May 6.

Stephen Sheldon’s rating is based on a combination of factors that reflect both positive and cautious elements in Alarm’s recent performance and outlook. The company reported solid first-quarter results, with revenue and adjusted EBITDA exceeding estimates, indicating resilience in a volatile market. The growth was primarily driven by SaaS/license revenue, which showed a healthy year-over-year increase. However, hardware revenue growth was modest, and management’s guidance suggests it will remain relatively flat, which could pose challenges.
Despite the positive earnings surprise and slight upward revision in revenue and profit guidance, the overall growth projections remain moderate. The company’s reliance on passing tariff-related costs to customers could also impact hardware margins, presenting potential headwinds. These mixed signals, with strong SaaS performance but limited hardware growth and external cost pressures, likely contributed to Sheldon’s Hold rating, indicating a balanced view of the company’s near-term prospects.

In another report released on May 6, Barclays also maintained a Hold rating on the stock with a $60.00 price target.