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Why Arlo Technologies Stock Is Soaring 25% Today

By Rich Smith – Aug 6, 2020 at 1:18PM

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Arlo beat earnings in Q2 -- and will probably do it again in Q3, too.

What happened

Thursday is looking like a very nice day indeed to be invested in shares of Arlo Technologies (ARLO -0.89%). Shares of the Internet of Things (IoT) maker of wireless security cameras, audio and video doorbells, and floodlights are up 25.5% as of 11:10 a.m. EDT, after Arlo reported better-than-expected sales and a less-bad-than-expected net loss for Q2 2020.

Heading into earnings, analysts had forecast Arlo would lose $0.41 per share on sales of $58.8 million in the quarter. Instead, Arlo reported last night that its sales were $66.6 million, with a loss of just $0.31 per share.  

A glowing green arrow climbs on a stock screen.

Image source: Getty Images.

So what

That's the good news. Now here's the bad. Despite beating estimates, Arlo's sales still declined 20% year over year. (Because COVID-19, natch.) Also worth noting: The $0.31 per-share loss that Arlo stated was only an adjusted, or pro forma, number. When calculated according to generally accepted accounting principles (GAAP), Arlo actually lost $0.38 per share.

Regardless, for being in the middle of a pandemic, the results weren't half bad. While sales were down, Arlo added 43,000 paid accounts in the quarter, a quarter-over-quarter increase of 72%, and a year-over-year increase of 59%. As CEO Matthew McRae pointed out, Arlo succeeded in "outperforming our expectations for the quarter, delivering top and bottom line results above the upper end of our guidance, despite supply and go-to-market challenges."

Now what

Looking ahead, Arlo is forecasting Q3 sales of $85 million to $95 million -- well ahead of the less than $82 million Wall Street has been forecasting. The company's guidance for a $0.33 to $0.24 pro forma loss ($0.41 to $0.32, GAAP) also appears likely to outperform Street estimates for a $0.30 pro forma loss.

In other words: Not only did Arlo outgrow expectations in Q2 but it's also likely to beat earnings in Q3.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Arlo Technologies. The Motley Fool has a disclosure policy.

Stocks Mentioned

Arlo Technologies Stock Quote
Arlo Technologies
$3.36 (-0.89%) $0.03

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