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

Arlo Technologies: A Strong Buy Due To SaaS Business Model Success And Outstanding Q1 2021


  • Arlo's outstanding Q1 2021 results confirm the new SaaS business model is successful. GAAP EPS breakeven is expected in 1st half of 2022.
  • The company reached 545,000 paid subscribers via accelerating +115% YoY growth and is on track for 1,000,000 paid subscribers by Q4 2021.
  • The company is an undervalued high-growth turnaround play with a potential 186% to 492% return by end of 2025.

Arlo Technologies headquarters in Silicon Valley
Photo by Sundry Photography/iStock Editorial via Getty Images


Arlo (NYSE:ARLO), a DYI security camera provider, reported Q1 2021 results on 5-May-2021, and they were outstanding. Revenue of $82.6M (+26.1% Y/Y) beat by $5.72M. Q1 Non-GAAP EPS of -$0.03 beat by $0.19 while GAAP EPS of -$0.13 beat by $0.18.

This article was written by

Avid long term oriented investor with an interest in value, growth, and special opportunity (spin-offs, insider trading) investing styles. Strong believer in identifying companies with competitive advantages in order to avoid stock investment losses. Self-educated.My expertise and unique investing style has arisen as a result of nearly a decade of professional experience in three highly regulated industries (aerospace and defense, medical devices, and pharmaceuticals) inclusive of work experience within the telecommunications and customer service industries. An engineer by education, a project director at work, and a writer at home, I am meticulous and apt at both the qualitative and quantitative aspects of investment. Income statements, balance sheets, and cashflow statements are for me a pleasant read.

Analyst’s Disclosure: I am/we are long ARLO. 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

Comments (13)

Hi there, whats your take on insiders selling? The insiders all seem to sell at the same time? They sold like 10% of their holdings?
Investing For The Future profile picture
@freddtheman General Counsel sold 32,976 shares on 30-Apr-2021 in connection with vesting of restricted stock units. CFO sold 91,108 shares on 30-Apr-2021 in connection with vesting of restricted stock units. CEO sold 128,590 shares on 30-Apr-2021 in connection with vesting of restricted stock units. They are withholding shares to meet tax obligations; they are technically non-open market dispositions but for ease of reference I also call them "insider selling," like you.


CFO sold 21,000 shares on 11-May-2021 in accordance with a trading plan adopted on 31-March-2021. This one is technically classified as an automatic sell.


My interpretation: they are receiving a bulk of their compensation via restricted stock units that are becoming vested and thus selling so they can get the cash flow. Their overall ownership of stock in Arlo remains high.

If you want to see scary levels of shareholder dilution due to issuance of shares (Arlo certainly does not have this problem to date), you might warrant a look at Palantir.
@Investing For The Future Thank you. Keep it up. 👍👍
Q1 21 v Q4 20 Subscriber adds was rather moderate. Adding say 30K per month. Will this accelerate? Note share count constantly rising (SBCs). OpCF -ve in Q1 21. Need to map WK across rest of year.
Investing For The Future profile picture
@A2015 Moderate? 114K paid subscriber accounts added, from 435K to 549K, or a total of 114K accounts added... that is 26% QoQ; 115% YoY. 114/3 = 38K per month. The new business model has only 4 quarters of run-room. As per the slide from Arlo's Q1 2021 earnings call, paid subscriber account growth is accelerating.

Even if the run-rate does not accelerate (in fact my model for valuation purposes assumes a constant run-rate, not an accelerating one) the potential returns from the current share price of $5.78 can be substantial.

Once the company breaks even in a few quarters time the investment community will begun noticing and realizing the opportunity.
What is Arlo's competitive advantage given that there are many products out there?
Investing For The Future profile picture
@jxiao8423 Thank you for reading and for your question.

1. Differentiator Products (Weak to Moderate Moat considering Q1 2021 results). They have an insane amount of product awards over competitors, see their Q1 Earnings Call PPT: All hardware products are refreshed as of 2020, which definitely helps against competitors.
2. Filing of Patents / Intellectual Property (Weak Moat) - I do not believe they can currently effectively defend IP given the # of competitors and similar functionality... it is cameras.
3. Pursuit of Strategic Partnerships (Moderate Moat) - Verisure partnership was clearly a brilliant and strategic move that is paying off.
4. Brand and Vision (based on Q1 2021 results and given consistent company branding, I'd now rate as a Moderate Moat with the opportunity of becoming a Strong Moat if the company's brand becomes widely known and associated with privacy, security, and safety).
5. Strong Dedicated Management and Employees (Moderate Moat) - their execution in 2020 and especially in Q1 2021 is spectacular - the 22% increase in product margin YoY is just amazing. If this continues, they will do very well.

See my previous article for more detail: seekingalpha.com/...

Potential future competitive advantages the company might gain:

1. Consumer Loyalty (I do not have enough information currently to assess)
2. Ecosystem (they are clearly building one, but it remains to be seen if becomes "sticky" like Apple's and turns into a comp. advantage)
3. Network Effect (for a specific mid-sized to large sized consumer - e.g. imagine installing all Arlo cameras for all of your warehouses / business locations and having the software work seamlessly and all of the information at your fingertips as it relates to DIY security monitoring. You control the camera locations, you control the security footage and information, and you have complete privacy over monitoring the ongoing events at your places of business - instead of 3rd party security firms).
4. Cost / Operational Advantages (unable to assess currently until we have another 1 year at a minimum to see their S&GA, CAPEX, long-term targeted gross / operation / net margins).

Hope this helps! If you think of anything else yourself, let us know.
@Investing For The Future Thanks, very helpful!
I like this company. A great play on housing, e-commerce and a house operating system. @Maxwello I think they have to hit 1mm subs. Latch an adjacent business is valued at ~1.5bn. "The stock market is a mechanism of transferring money from the impatient to the patient."
Investing For The Future profile picture
@mssollas Thank you for reading! Agreed that Q3 and Q4 (once 1 million paying subscribers are reached) will likely drive at least moderate share price appreciation as it will be hard to ignore the potential SaaS revenues and the fact that the spin-off becomes profitable (e.g. new business model has enough demand from consumers and B2B to allow continued growth).
Maxwello profile picture
Your articles in February and March said the same things yet the stock price has gone down since February and is hovering at the same price as in March. What will it take for this thing to get a move on?
@Maxwello patience
Investing For The Future profile picture
@Maxwello Thank you for reading and for your question. There may be a number of catalysts that would help the share price appreciate:

1. Continued strong quarterly reports, so Q2, Q3 and Q4, demonstrating sustainable non-GAAP profitability
2. News announcements by Arlo of new partnerships with US / APAC security providers or home-builders, inclusive of attractive sales target agreements
3. Continued product awards from CES and other organizations
4. Institutional and hedge fund investors taking a more active interest in the company
5. More stock coverage on Seeking Alpha, Motley Fool, and other financial websites

Ultimately, the stock is underfollowed and thus the opportunity: while I do not know WHEN investors will realize that this is a hidden gem, if Arlo continues performing as superbly as it did in Q1 2021 eventually the price share will appreciate, and aggressively.

Hope this helps!
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About ARLO

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on ARLO

Related Stocks

SymbolLast Price% Chg
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.