ADT - Embedded Expectations Analysis - 2020 12 15
ADT Inc. (ADT:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 15.3x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about their revenues and partnerships suggest the potential for near-term headwinds, market expectations are too bearish, suggesting outperformance is likelySpecifically, management may have concerns about their operating performance outlook, particularly in Canada, and the acceleration of their ADT + Google platform release. In addition, they may lack confidence in their ability to execute internal initiatives for growth, sustain gross recurring monthly revenue (RMR) additions, and maintain customers. Furthermore, they may be overstating the potential of an Alarm.com partnership, their market position in service, and the capabilities of their Defenders acquisition. Finally, they may lack confidence in their ability to improve their sales to commercial customers, reduce debt, and benefit from Operation Warp Speed
Although management's concerns about revenues and partnerships suggest the potential for near-term headwinds, given strong demand for home security and the firm's strong business strategy, market expectations remain far too bearish, and longer-term equity outperformance is likely warranted
ADT is a provider of monitored security and interactive home and business automation solutions in the United States and Canada. The company's monitored security and automation offerings involve the installation and monitoring of security and premises automation systems designed to detect intrusion; control access; sense movement, smoke, fire, carbon monoxide, flooding, temperature, and other environmental conditions and hazards; and address personal emergencies. The company's products and services include interactive technologies to allow its customers to remotely monitor and manage their residential and commercial environments by adding automation capabilities to its monitored security systems.
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