Please ensure Javascript is enabled for purposes of website accessibility

Why Stock Fell Nearly 18% in May

By Beth McKenna - Jun 9, 2019 at 6:35PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The home security tech company's cautious outlook alarmed some investors.

What happened

Shares of home security tech company (ALRM 3.16%) dropped 17.7% in May, according to data from S&P Global Market Intelligence.

This performance isn't as bad as it might seem at initial glance, as the S&P 500, including dividends, fell 6.4% last month. stock remains an outperformer over the past year, as it's gained 19.7% over the one-year period though June 7, versus the broader market's 5.8% return.

Computer, notebook, and cell phone screens showing images of homes being monitored.

Image source:

So what

We can attribute stock's poor performance last month to the company's May 9 release of its first-quarter results, which included a full-year 2019 outlook that alarmed some investors. Shares fell 8.2% the next day and plunged 15.4% in the two-trading day period following the release.

In Q1, the Virginia-based company's revenue grew 21% year over year to $112.3 million, while earnings per share adjusted for one-time items were flat with the year-ago period at $0.34. The bottom line did manage, however, to beat Wall Street's $0.31 consensus estimate. management is taking a cautious stance on its outlook because of tariffs on Chinese goods. While the company increased its full-year 2019 revenue guidance, it left its earnings guidance unchanged. CEO Stephen Trundle addressed this topic on the earnings call:

Approximately one-third of the finished goods hardware products that we offer our service providers are imported from China. To date, the tariffs have had a modest impact on, but given the amount of activity in this area, we will remain diligent in watching the developments and will make appropriate adjustments if and when we have greater visibility into the outcome of the trade negotiations. 

For context, hardware and other revenue accounted for about 29% of the company's total revenue in the first quarter, with software-as-a-service and license revenue bringing in the other 71%.

Now what

For the full year, now expects adjusted EPS between $1.37 and $1.41 on revenue of $447.3 million to $454.2 million. Previous revenue guidance was $440 million to $450 million.

In 2018, the company turned in adjusted EPS of $1.33 on revenue of $420.5 million. So, at the midpoints, its current guidance represents  adjusted earnings growth of 4.5% and revenue growth of 7.2% year over year. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alarm.Com Holdings, Inc. Stock Quote
Alarm.Com Holdings, Inc.
$59.10 (3.16%) $1.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.