Entering text into the input field will update the search result below

Arlo: Security Solution At A Secure Price?

Aug. 03, 2018 2:11 PM ETArlo Technologies, Inc. (ARLO)NTGR


  • Arlo Technologies is a spin-off coming out of Netgear.
  • The company reports strong growth, although growth is coming down rapidly.
  • I like the modest sales multiple, yet worry about the very modest margins especially if corporate cost allocation is not yet accounted for.
  • Members of my private investing community, Value In Corporate Events, receive real-time trade alerts on this idea and many more. Learn more today >>

Arlo Technologies (NYSE:ARLO) went public as a spin-off from Netgear (NTGR), creating a pure play in a rapidly growing segment, although growth is coming down. Concerns of mine include the rapid slowdown in growth, the fact that the company has hardly been profitable despite strong growth, and the fact that the stand-alone business will incur additional costs.

Hence this remains a ¨show me first¨ story, yet I am placing the company on my watchlist, certainly in combination with the relative arbitrage opportunity provided between Arlo and its former mother company.

The Company

Arlo combines cloud infrastructure with a mobile app to create connected devices. The solution is about creating seamless connections to help consumers and businesses to protect both people and property they care about the most. Typical applications to think about include (security) cameras, baby monitors and security lights, among others.

Since the launch late in 2014, the company has shipped 7.5 million devices, as the platform now has 1.9 million registered users in over a hundred countries. With Wi-Fi systems and RF connectivity being cheap and constantly being available, solutions provided come at a very low cost. The smart design of cameras and compatibility make it an easy solution for consumers as well.

Note that the company is not a new business; it has been an operating business within Netgear, which is now spinning Arlo out (in part). This brings with it some uncertainties as the fact that the company will become a stand-alone business involves setting up company infrastructure. This makes that the company will incur a non-specified amount of costs as well.

The Offering And Valuation Discussions

Arlo Technologies sold 10.2 million shares at $16 each indicating that demand for this offering was quite disappointing, with the preliminary pricing range being set at $18-$20 per share. Despite the softer pricing, Arlo

Please subscribe to Value In Corporate Events - Marketplace Checkout to obtain premium research on all the latest IPOs, M&A activity and other corporate events. Reviews of situations will be made upon request!

This article was written by

The Value Investor profile picture
Finding value that gets unlocked in M&A, IPOs and other corporate events
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.