Arlo Technologies, Inc. (NYSE:ARLO) is one of the top small cap stocks with huge growth potential. On May 18, investment bank Oppenheimer initiated coverage on Arlo Technologies, Inc. (NYSE:ARLO) with an Outperform rating and a price target of $20.
Martin Yang based his bullish case for Arlo on the company’s transformation as a business. This is in reference to the fact that Arlo has moved away from being a low-cost camera seller and reinvented itself as a premium, service-first platform that earns recurring revenue from its customers. Yang noted that subscriptions and services are now the backbone of Arlo’s business, which makes up 60% of total revenue and carry an 85% gross margin. He noted that the company’s annual recurring revenue in 2025 grew 28% to $330 million, which, in his analysis, underlines the strength and momentum of this shift.
Yang also pointed to Arlo’s partnerships with ADT, Samsung, and Comcast that he said have not yet been fully tapped for subscriber growth. In the analyst’s view, these relationships represent a multi-year opportunity to bring in new paying users, which gives Arlo a long runway ahead, even beyond what is already reflected in the numbers.
He also pointed to what he sees as a structural mispricing in the stock. Put simply, the analyst argues that the market has not yet properly valued Arlo as a services-led business, despite the clear shift in its revenue mix.
Arlo Technologies, Inc. (NYSE:ARLO) is a smart home security company. It develops cloud-based platforms, wireless security cameras, video doorbells, floodlights, and alarm systems for residential and commercial users.
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