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Why Stock Soared 21.3% in January

By Steve Symington – Updated Apr 24, 2019 at 4:12PM

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One analyst offered kind words for the property security and monitoring leader last month.

What happened

Shares of (ALRM -0.09%) climbed 21.3% in January, according to data from S&P Global Market Intelligence, both as the broader market rebounded and following a positive analyst note on the home automation and monitoring services specialist.

On the former, the S&P 500 climbed an impressive 8% last month, but's positive performance got a boost on Jan. 8 from First Analysis analyst Howard Smith, who reiterated his "strong buy" rating and $65-per-share price target on the company. That marked a solid 26% premium from's trading price at the time.

Blue stock market chart indicating gains on a dark blue and black background


So what

Smith argued that is "exceptionally well positioned in the wireless interactive security market," astutely adding that it's poised to "reward investors with above-market returns."

Of course, it probably helped that shares had pulled back in recent months as achieved strong third-quarter results and raised its 2018 guidance but followed that with an admittedly conservative outlook for growth in 2019.

Now what

Indeed, management left room for upside. During the Q3 conference call in November, CFO Steve Valenzuela said the company suspects the strong hardware sales that drove the company's relative outperformance will continue into the fourth quarter and next year. But until has a clearer picture of sell-through trends for those incremental sales, management prefers taking a more conservative approach to modeling initial 2019 guidance.

Check out the latest earnings call transcript.

I applaud for this prudence, as it's arguably better to under-promise and over-deliver than the other way around. And given's rise in January, it seems the market is betting its fourth-quarter report later this month will hold good news.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Holdings. The Motley Fool has a disclosure policy.

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