Arlo Technologies (ARLO): Reassessing Valuation After Upgraded Earnings Forecasts and New Strong Buy Rating

Arlo Technologies (ARLO) just caught investors attention after analysts sharply upgraded earnings expectations over the past quarter, with Zacks shifting the stock into its top Strong Buy category.

See our latest analysis for Arlo Technologies.

Even with some choppy trading recently, including a pullback that leaves the latest share price at $13.94, Arlo still boasts a robust year to date share price return and an impressive three year total shareholder return. This suggests momentum is pausing rather than breaking.

If Arlo’s setup has your attention, this could be a good moment to explore other connected home and security plays across tech by scanning high growth tech and AI stocks.

With earnings forecasts surging, a fresh Strong Buy rating in place, and the stock still trading well below consensus targets, investors now face a key question: is Arlo genuinely undervalued, or has the market already priced in its next leg of growth?

Most Popular Narrative Narrative: 39.9% Undervalued

With Arlo Technologies trading at $13.94 against a narrative fair value of $23.20, the prevailing view points to sizable upside potential from here.

Continual migration of subscribers to higher priced AI driven service tiers (Arlo Secure 6) and the corresponding increase in ARPU (now over $15, up 26% y/y) reinforces the long term shift to recurring, high margin (85% non GAAP service margin) subscription revenue, supporting expanding net margins and earnings visibility.

Read the complete narrative.

Want to see what kind of revenue path and profit margins could justify that gap, and why a rich future earnings multiple is baked in? Read on to unpack the assumptions powering this fair value call.

Result: Fair Value of $23.20 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this upside case could falter if hardware commoditization crushes device margins or if subscription fatigue slows the uptake of higher priced service tiers.

Find out about the key risks to this Arlo Technologies narrative.

Build Your Own Arlo Technologies Narrative

If you see the story unfolding differently or want to dig into the numbers yourself, you can build a personalized view in just minutes: Do it your way.

A great starting point for your Arlo Technologies research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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