Shares of Alarm.com (NASDAQ:ALRM) 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 Alarm.com'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 Alarm.com's trading price at the time.
Smith argued that Alarm.com 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 Alarm.com achieved strong third-quarter results and raised its 2018 guidance but followed that with an admittedly conservative outlook for growth in 2019.
Indeed, Alarm.com 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 Alarm.com has a clearer picture of sell-through trends for those incremental sales, management prefers taking a more conservative approach to modeling initial 2019 guidance.
I applaud Alarm.com for this prudence, as it's arguably better to under-promise and over-deliver than the other way around. And given Alarm.com's rise in January, it seems the market is betting its fourth-quarter report later this month will hold good news.