As the mental health strain associated with the COVID-19 pandemic clashes with rising economic pressures, the confluence of angst cynically bolsters the bullish narrative undergirding Arlo Technologies (US:ARLO). Specializing in smart-home applications and comprehensive security services, Arlo has always cut a relevant profile.
However, as society hurtles toward a brave new world of diminishing police forces and escalating criminality, ARLO stock offers incredible pertinence. The share price of the NYSE-traded stock is up a whopping 164% so far in 2023.
What’s that all about?
Early last year, The Wall Street Journal reported that police chiefs struggled to keep their departments fully staffed. Amid burgeoning criticism of law enforcement interaction with local communities – particularly for disenfranchised regions – resignations increased while hiring became challenged due to a broadly tight labor market.
In addition, the WSJ mentioned that officers “…describe the job as more stressful and less rewarding than it was in the past. As a result, the chiefs say, departments are taking longer to respond to some calls while crimes including homicide are on the rise nationwide.”
Fundamentally, investors probably couldn’t ask for a more powerful catalyst for ARLO stock. Inherently, the unprecedented nature of COVID-19 and the underlying governmental responses sparked significant strains on collective mental health. Further, The Hill mentioned that rising inflation correlated with an increase in crime, including violent crime.
Eyeing Options Action
Unsurprisingly, astute traders picked up on this dynamic. Following the close of the May 30 session, ARLO stock represented a highlight on Fintel’s screener for unusual stock options volume. Specifically, call volume hit 3,939 contracts against an open interest reading of 3,841. On average, volume reaches only 639 contracts.
On the other side of the equation, put volume only mustered 108 contracts against open interest of 1,375. Typically, put volume prints a modest 154 contracts. Since the May 12 session, Fintel’s options flow screener demonstrates decisively bullish sentiment, with traders buying ARLO call options via multi-sweep transactions.
Cynical Bright Spot
To be sure, Arlo’s first quarter of 2023 earnings results revealed that total revenue reached only $111 million, representing a decrease of 11% on a year-over-year basis. However, a key highlight centered on the company’s record Q1 service revenue of $43.9 million. This tally yielded growth of 46.8% YOY.
“Our Q1 results give Arlo a strong start to 2023 and our outlook for the first half remains robust. In the face of an uncertain consumer backdrop, we delivered revenue and earnings above guidance as our pricing strategy began to pay dividends. Fueled by our subscription business that reached record revenue and gross margin, Arlo delivered non-GAAP operating income of $1.2 million and produced free cash flow of $9 million,” said Arlo CEO Matthew McRae.
Further, McRae added that “[o]ur recurring services revenue is at the heart of this performance and, with best-in-class products and new offerings like our security system and Arlo Safe, we are poised to continue our strong trajectory.”
Moving forward, the aforementioned Arlo Safe service may see increased demand. Primarily, the platform offers personal safety, allowing subscribers to tap a button to receive immediate emergency help. In addition, Arlo Safe sends help following an automotive accident.
According to the American Psychological Association, traffic deaths began rising since the onset of the pandemic. With the world becoming fraught with danger, ARLO stock may be a bright spot (albeit cynically so) in an otherwise challenging market environment.
This article originally appeared on Fintel
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