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Why ADT Stock Skyrocketed Today

By Joe Tenebruso – Aug 3, 2020 at 1:33PM

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The security products company will receive a $450 million investment from a tech titan.

What happened 

Shares of ADT (ADT 4.69%) soared on Monday after the provider of security and smart home solutions disclosed a new partnership with Alphabet's (GOOG 3.09%) (GOOGL 2.84%) Google. As of 1:20 p.m. EDT, ADT's stock was up 57% after having spiked by as much as 99% earlier in the day.

So what

ADT said it would work with Google to "create the next generation of smart home security offerings." The deal will link its leading professional monitoring network and installation services with Google's AI-powered Nest line of connected home products.

"We are thrilled to partner with Google to provide the smart home market with a strong, differentiated product and service offering that integrates the best technology, hardware, and smart home security expertise from our two brands," CEO Jim DeVries said in a press release.

A person is holding a tablet displaying a digital image of a home.

ADT Stock surged on news of its deal with Google. Image source: Getty Images.

Under the terms of the agreement, Google will invest $450 million in exchange for a 6.6% stake in ADT. Each company will contribute an additional $150 million for product development and marketing purposes. "Google's partnership and financial investment in ADT underscore the depth of our joint commitment to the smart home and security markets," DeVries said. 

Now what 

The deal has the potential to alter the competitive landscape in the home security and smart-home markets. Intensifying competition from do-it-yourself rivals like SimpliSafe and Ring, which was acquired by Amazon (AMZN 4.47%) in 2018, has taken a toll on ADT in recent years. This partnership with Google could help ADT take back market share from these formidable competitors.

The partnership will also help to advance Google's connected home ambitions. Google remains in a distant second place behind Amazon for smart home market share, with Amazon controlling roughly 70% compared to Google's 25%. "We're excited to partner with ADT to further our mission of building helpful devices for the home," Nest General Manager Rishi Chandra said.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

ADT Stock Quote
$8.14 (4.69%) $0.36
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Alphabet Inc.
$101.44 (2.84%) $2.80, Inc. Stock Quote, Inc.
$121.06 (4.47%) $5.17
Alphabet Inc. Stock Quote
Alphabet Inc.
$102.37 (3.09%) $3.07

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