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Why Shares of Resideo Technologies Are Falling Today

By Lou Whiteman – Updated Aug 3, 2020 at 10:30AM

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Smart-home gadget competition is about to heat up.

What happened

Shares of Resideo Technologies (REZI 0.63%) fell 16% on Monday morning after Alphabet (GOOG -1.39%) (GOOGL -1.40%) made an aggressive move to expand in one of Resideo's top business lines. That's a tough company to compete with, and investors are understandably concerned.

REZI Chart

REZI data by YCharts

So what

Resideo is a maker of climate control, camera, and security products for homes and businesses. The stock has been largely a dud since being spun out of Honeywell International in 2018, and the news didn't get any better for Resideo investors on Monday.

Alphabet's Google business is buying a 6.6% stake in home security specialist ADT (ADT -3.51%) for $450 million as part of a deal that will lead to tight integration between ADT's security products and Google's Nest devices.

A stock arrow heading downward

Image source: Getty Images.

As part of the deal, both Alphabet and ADT will provide $150 million for marketing and product development efforts.

Resideo has its own line of security and smart-home products. Investors fleeing the shares on Monday are worried that a combination of ADT's security market share with the deep pockets of a FAANG stock will make it hard for other vendors to compete.

Now what

Resideo was a tough company to like for a long-term investor even before this partnership. But prior to the ADT announcement, Resideo shares were gaining momentum on market hope that the COVID-19 pandemic had not permanently stunted housing construction and that the stock was oversold.

The idea of Google and ADT teaming up has swamped that hope and is sending investors running for the exits on Monday. Absent investors seeing some idea of how Resideo will respond, it might be hard for the stock to regain that momentum.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Resideo Technologies, Inc. Stock Quote
Resideo Technologies, Inc.
REZI
$19.27 (0.63%) $0.12
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$98.74 (-1.40%) $-1.40
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$99.17 (-1.39%) $-1.40
ADT Stock Quote
ADT
ADT
$7.70 (-3.51%) $0.28

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

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