Although a rise in social instability presents obvious problems, for companies that specialize in security-related services, such as home monitoring technology provider Alarm (NASDAQ:ALRM), the dynamic could cynically lift their valuations. In particular, the expiration of Title 42 – a public health restriction related to COVID-19 – could be a massive tailwind. Therefore, I am bullish on ALRM stock.
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A Quick Background of Title 42
According to CNN, during the early days of the COVID-19 crisis, the Centers for Disease Control and Prevention issued a public health order to help stop the spread of COVID-19. Further, CNN points out that this order “allowed authorities to swiftly expel migrants at US land borders.” This policy is known as Title 42, referencing the component of the U.S. code that gave the CDC director authorization for the expelling.
However, with Title 42 expiring last week, uncertainty surrounds the U.S.-Mexico border. From another CNN report, one official from the Department of Homeland Security stated that the migrant crisis “will get worse.”
Several federal agencies – including the Secret Service and U.S. Marshals – along with members of the military (most from the Army) buttressed Customs and Border Protection staff at the southern border. “We are clear-eyed about the challenges we are likely to face in the days and weeks ahead, which have the potential to be very difficult,” said Homeland Security Secretary Alejandro Mayorkas last week.
ALRM Stock Might Rise on the Crossfire Issue
Of course, caught in the crossfire of this desperate human crisis are millions of American households. Due to rising public criticism of police in recent years, fewer people seek careers in law enforcement. As a result, many families must take an active role in their security and protection, and home security offers a solution.
Fundamentally, ALRM stock is fortuitously positioned to swing higher over the next several years. Admittedly, the bullish narrative for Alarm hasn’t been successful for recent stakeholders. However, social circumstances are largely worsening, which represents upside potential for the security specialist.
Prior to the expiration of Title 42, increases in certain acts of lawlessness – particularly property crime – helped undergird the optimistic thesis for ALRM stock. Now, with the government order expiring, the increase in the number of people in the U.S. only increases security risks.
In addition, investors need to consider how recession fears can spark greater social instability, thereby boosting ALRM stock. With inflation, geopolitical flashpoints, and bank failures all applying pressure on a rather fragile post-COVID-recovery effort, a recession materializing represents a non-zero probability.
Further, one doesn’t need to be a criminologist to understand that financial pressures help spark criminality. Ample research literature connects headwinds such as inequality and deprivation to higher crime and lower trust. In other words, the expiration of Title 42 comes at a particularly sensitive and vulnerable time for American families.
This dynamic doesn’t guarantee upside for ALRM stock. However, increased anxieties over the issue offer a free organic advertisement for Alarm’s services.
Financials Pointing in the Right Direction
Better yet, the bullish narrative for ALRM stock isn’t just limited to outside fundamental catalysts. For Alarm’s Q1-2023 earnings report, the security specialist posted total revenue of $209.72 million. This tally represented a 2% lift from the $205.44 million posted in the year-ago quarter. As well, Alarm beat Q4-2022’s sales result of $208.14 million.
In addition, Alarm delivered net income of $14.42 million, up nearly 59% from the $9.08 million posted in Q1 2022.
“We’re pleased to report solid first quarter results and continued momentum across the business to start the new year,” said Alarm CEO Steve Trundle. “Many of the markets we serve performed well and aggregate performance was better than expected.”
Is ALRM Stock a Buy, According to Analysts?
Turning to Wall Street, ALRM stock has a Moderate Buy consensus rating based on four Buys, two Holds, and zero Sell ratings. The average ALRM stock price target is $63.00, implying 24.95% upside potential.
The Takeaway: In the Right Place at the Right Time
Although people can debate the expiration of Title 42, what’s really not questionable is the impact this has on families. Already struggling with numerous issues, a border and migrant crisis is the last thing struggling households need, as a higher population can lead to more crime on an absolute basis. During a vulnerable time in American society, increasing one’s personal security measures makes sense. Therefore, ALRM stock appears attractive.
