Oppenheimer initiates Arlo coverage, citing services-led pivot
The investment bank sets a $20 price target on the NYSE-listed stock, highlighting an 85 per cent gross margin on subscriptions and untapped potential in partnerships with ADT, Samsung and Comcast.
Oppenheimer has initiated coverage of Arlo Technologies (NYSE: ARLO) with an Outperform rating and a $20 price target, arguing that the market has mispriced the smart home security provider. Analyst Martin Yang contends that the stock’s current valuation fails to reflect the company’s strategic transformation from a low-cost hardware vendor to a premium, service-first platform.
The shift in business model has fundamentally altered Arlo’s revenue composition. Subscriptions and services now account for 60 per cent of total revenue, carrying a gross margin of 85 per cent. This recurring revenue stream has demonstrated strong momentum, with annual recurring revenue growing 28 per cent to $330 million in 2025, according to Yang’s analysis.
Yang highlighted that the structural change in Arlo’s revenue mix suggests a long runway for growth that is not yet fully priced into the share. The analyst noted that the market has not yet properly valued the company as a services-led business, despite the clear transition away from one-time hardware sales toward a model that generates predictable, high-margin income.
Beyond the core business transformation, Oppenheimer pointed to significant untapped potential in Arlo’s existing partnerships. Yang identified relationships with ADT, Samsung, and Comcast as key drivers for future subscriber growth, describing these connections as a multi-year opportunity to acquire new paying users.
Arlo Technologies develops cloud-based platforms and wireless security devices, including cameras, video doorbells, floodlights, and alarm systems, for both residential and commercial users. The investment bank’s initiation underscores the growing investor focus on recurring revenue models within the technology and security sectors.
