What happened

Shares of Arlo (NYSE:ARLO) skyrocketed by as much as 47% Tuesday after investors noticed an exclusive product listing on Apple's online storefront. Trading in the stock was temporarily halted earlier in the day due to volatility, but has since resumed. As of 1:06 p.m. EST, the share price was still up by about 30%.

So what

Landing an exclusive distribution deal with Apple could prove a significant windfall for Arlo, a small-cap company that specializes in smart home technology and gadgets. The Apple Store listing that got the market's attention is for a pair of Arlo Ultra 4K wireless security cameras, which closely resemble the Arlo Ultra 2 camera the company sells on its own website, but which has a slightly different model number.

Green stock chart going up

Image source: Getty Images.

Apple has been seeking to add manufacturers to its smart home platform, which lags competing platforms in numerous ways. The Arlo Ultra 4K devices are compatible with the Cupertino tech giant's HomeKit standard.

Now what

Arlo shipped just under 1 million units in the third quarter, but it has struggled to convince customers to subscribe to the paid versions of its services. Of its 4.8 million registered accounts, only about 356,000, or 7%, are paid accounts.

Arlo already has retail distribution partnerships, but a new deal with Apple has the potential to dramatically expand the availability and exposure of its products. The company has been focusing on growing online sales due to challenges associated with selling via brick-and-mortar retailers during the COVID-19 pandemic.

"We think we'll see more, for instance, of online sales and some of these physical retailers having a much more omnichannel [fourth] quarter," CEO Matt McRae commented on the earnings call last month.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.