Home Security Stocks Sink After Salvo From Google-ADT Alliance

Alarm.com Holdings Inc. plunged as much as 20%, the most intraday in almost five years, after Alphabet Inc.’s Google announced a partnership to create smart-home security products with ADT Inc.

Stifel analyst Brad Reback said the pact is a “potential long-term issue” for Alarm.com, which offers interactive security and video monitoring for residential and commercial properties. In a February filing, Alarm.com said ADT represented “greater than 15% but not more than 20%” of its revenue in the three years ended 2019.

“This ADT/Google partnership could become a headwind to ADT’s existing technology relationship (five-year deal) with Alarm.com that was formed in 2017,” Reback said.

William Blair analyst Matthew Pfau said he doesn’t expect that the alliance will have a material impact on Alarm.com over the next year, as it’d be tough “for ADT to move its roughly 3 million subscribers on Alarm.com to another platform.” But Pfau said, at the least, the partnership could be used to put pressure on Alarm.com during contract renegotiations. As a result, Pfau downgraded his Alarm.com investment rating to market perform from outperform, also citing a lack of catalysts to lift Alarm.com’s stock.

Shares of home-security company Resideo Technologies Inc. also slumped Monday, falling as much as 22% in the biggest intraday decline since March.

ADT expects to offer some Google devices to its customers starting this year and to expand the integration in 2021, according to a statement. As part of the partnership, Google will invest $450 million to acquire a 6.6% stake in ADT.

©2020 Bloomberg L.P.

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