SmartRent, Inc. (SMRT): A Bull Case Theory

We came across a bullish thesis on SmartRent, Inc. (SMRT) on Twitter by David. In this article, we will summarize the bulls’ thesis on SMRT. SmartRent, Inc. (SMRT)’s share was trading at $1.15 as of March 18^th. SMRT’s forward P/E was 47.62 according to Yahoo Finance.

An aerial view of multifamily properties in the southeastern United States.

SmartRent (SMRT) presents a highly asymmetric investment opportunity, with its stock hitting all-time lows despite a strong financial position. The company, a subscription software business with a hardware component, caters to large multifamily property owners, effectively serving as the “Nest” for multifamily buildings. With a market cap of $256M and $163M in net cash, its total enterprise value (TEV) stands at just $92M, meaning 64% of its market cap is backed by cash. At 0.5x sales, the stock trades at an exceptionally low valuation for a business with high retention and a sticky customer base. The company’s subscription sales are annualizing at $75M, generating $50M in subscription gross profits, yet it trades at only 1.2x subscription sales and 1.8x subscription gross profits—an extreme discount for a high-margin, recurring revenue model. An activist investor, Land and Buildings, has been involved despite the stock’s 50% decline, signaling a potential push for strategic actions. A more reasonable valuation of 10x to 20x subscription gross profits suggests a share price of $3.50 to $6. With strong downside protection from cash reserves and resilient subscription revenue, SMRT offers a compelling risk/reward setup.

SmartRent, Inc. (SMRT) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held SMRT at the end of the fourth quarter which was 19 in the previous quarter. While we acknowledge the risk and potential of SMRT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SMRT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.