Arlo Technologies saw its shares rocket on Wednesday after the maker of internet-connected home security cameras posted a surprise profit for the fourth quarter and gave an upbeat outlook. Arlo stock broke out on the news.
The Carlsbad, Calif.-based company earned an adjusted 4 cents a share on sales of $142.9 million in the December quarter. Analysts had expected Arlo to lose 3 cents a share on sales of $135 million, according to FactSet. In the year-earlier period, Arlo lost an adjusted 8 cents a share on sales of $114.8 million.
In the fourth quarter, Arlo achieved its first adjusted profit since going public in August 2018. It reached the milestone despite "considerable global supply chain challenges," Chief Executive Matthew McRae said in a news release late Tuesday.
For the current quarter, Arlo expects to lose an adjusted 3 cents a share on sales of $115 million. That's based on the midpoint of its own forecast. Wall Street had predicted Arlo would lose 5 cents a share on sales of $95 million.
Arlo Stock Spikes Up On Report
On the stock market today, Arlo stock soared 28.9% to 11.19. In morning trades, it broke out of a nine-week consolidation pattern at a buy point of 10.98, according to IBD MarketSmith charts. Arlo stock hit a three-year high of 11.50 in intraday trading Wednesday.
Arlo makes a portfolio of smart connected devices, including wire-free Wi-Fi and LTE-enabled security cameras, indoor security cameras, audio and video doorbells, and floodlights. It also offers subscription services for home security and monitoring.
"Our new business model for subscriptions continued its momentum, adding a record 190,000 paid accounts in Q4, an increase of 141% year over year," McRae said. "Our impressive paid account growth drove our strong recurring revenue growth as we exited 2021 with annual recurring revenue of $90.1 million, growing at 94% year over year."
Arlo ended 2021 with nearly 1.07 million paid accounts.
Arlo Nabs Price-Target Hike
Deutsche Bank analyst Jeffrey Rand reiterated his buy rating on Arlo stock and raised his price target to 14 from 10.
"We come away from Q4 earnings and the business update with more conviction in Arlo's transformation to a services company," he said in a note to clients. Rand said he was particularly impressed by the company's expectations to grow revenue by 30% or more in 2023.
Arlo expects to have more than 5 million paid accounts in the next three to five years.
Arlo stock has an IBD Composite Rating of 60 out of 99, according to IBD Stock Checkup. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
