ADT (NYSE:ADT) is getting into the residential solar business, and that news alone was enough to offset a lackluster quarter. Shares of ADT traded up as much as 15% on Tuesday morning, before falling back some, on excitement about the home security company expanding its reach. As of 10:50 a.m. EST, its stock was up 12.3%.
Early Tuesday, ADT reported a third-quarter loss of $0.07 per share on revenue of $1.31 billion, beating on sales by about $20 million but falling well short of the $0.09-per-share profit analysts had been expecting. Some of that loss was attributable to the cost of converting wireless systems to newer radios due to plans by telecommunications companies to shut down old spectrum, and it should be one-time in nature.
Markets were mostly focused on ADT's other announcement, a deal to acquire Sunpro Solar for $825 million in cash, stock, and assumed debt. Sunpro is a Louisiana-based company that designs, installs, and maintains solar panels, and the deal marks ADT's expansion into the solar panel business.
"With its strong focus on the customer, Sunpro is the perfect partner for ADT and a logical extension of our ecosystem, unlocking an integrated home experience that includes security, automation, and energy management," ADT CEO Jim DeVries said in a statement. "By combining a cash-flow-positive company in the high-growth solar space with ADT's trusted brand, national footprint, and cross-sell potential, we can expand offerings to our customers and accelerate growth for both ADT and ADT Solar."
ADT said that residential solar is a $15 billion annual market but one that has only penetrated 3% of U.S. homes to date. The company hopes that it will be able to grow solar by marketing it to ADT's existing security customers.
Solar is a fragmented industry but one with a lot of potential. ADT's move makes a lot of sense and continues a trend of the company trying to future-proof its business by offering new tech. The company in 2020 received an investment from Alphabet that came with an agreement to sell Nest smart-home devices. It also acquired LifeShield, a company trying to disrupt ADT's core security business by offering a do-it-yourself option.
As with any acquisition, it will take time to see if this deal works out as planned. But the logic behind it is sound, and investors are understandably responding with a cheer on Tuesday.