What Happened?
Shares of smart home company SmartRent (NYSE:SMRT) jumped 18.7% in the afternoon session after the company reported second-quarter results that showed strong growth in its subscription business and aggressive cost-cutting measures, which outweighed a drop in total revenue. The smart-home technology provider's total revenue fell 21% to $38.3 million, a result of a planned shift away from selling bulk hardware. However, investors focused on the 11% increase in Annual Recurring Revenue, which reached $56.9 million and signaled strength in its software subscription model. SmartRent also expanded its cost reduction program, targeting $30 million in yearly savings. The company stated a clear goal to achieve cash flow neutrality by the end of 2025, a move that reassured investors about its financial discipline. Despite a wider net loss for the quarter, the positive outlook on recurring revenue and cost management propelled the stock higher.
Is now the time to buy SmartRent? Access our full analysis report here, it’s free.
What Is The Market Telling Us
SmartRent’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. But moves this big are rare even for SmartRent and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 14 days ago when the stock gained 4.4% on the news that a new trade agreement between the United States and Japan spurred a broad market rally. The positive sentiment swept across markets after it was announced the U.S. and Japan had reached a new trade deal. The agreement included a 15% tariff on Japanese goods imported into the U.S. and a commitment from Japan to invest $550 billion in the U.S. and open its markets to American cars and agricultural products. This development boosted investor confidence and contributed to a widespread rally, lifting stocks across many sectors. The Dow Jones Industrial Average and the S&P 500 both posted gains, creating a favorable environment that likely benefited individual stocks.
SmartRent is down 34.3% since the beginning of the year, and at $1.15 per share, it is trading 41.4% below its 52-week high of $1.96 from November 2024. Investors who bought $1,000 worth of SmartRent’s shares at the IPO in February 2021 would now be looking at an investment worth $103.53.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.