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Arlo (ARLO) Stock Trades Down, Here Is Why

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What Happened?

Shares of home security provider Arlo (NYSE:ARLO) fell 26% in the morning session after the company reported disappointing third-quarter earnings. Its revenue guidance for the next quarter missed expectations, and its EBITDA fell short of Wall Street's estimates. 

Sales growth was modest, with product revenue declining by 4% year-on-year despite a push in service-related revenue, which now represents nearly 50% of the total revenue mix. 

Profitability was also under pressure as declining hardware margins were only partially offset by gains in high-margin services. 

Furthermore, the company observed consumer demand shifting towards lower-priced products, prompting management to adopt aggressive promotional strategies to drive volume ahead of the holiday season. Overall, this was a weaker quarter.

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What The Market Is Telling Us

Arlo’s shares are very volatile and have had 22 moves greater than 5% over the last year. But moves this big are rare even for Arlo and indicate this news significantly impacted the market’s perception of the business.

Arlo is up 25.1% since the beginning of the year, but at $11.53 per share, it is still trading 32.6% below its 52-week high of $17.10 from July 2024. Investors who bought $1,000 worth of Arlo’s shares 5 years ago would now be looking at an investment worth $4,060.

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