In his Homework segment of "Mad Money" Wednesday, host Jim Cramer followed up on the stock of Arlo Technologies (ARLO) , which had stumped him during an earlier show. He said Arlo is a tiny company, but it's also a good one.
Arlo was spun out of Netgear (NTGR) in 2018 as a stand-alone provider of home security hardware and services. Cramer said the hardware business is awful, which is why Arlo pivoted to offer more cloud services, including artificial intelligence.
But while there's a lot to like about Arlo, the company is not without problems. Shares trade in the single digits for a reason. Arlo derives 72% of sales from hardware, and while its margins are improving, the company is still not profitable. However, Cramer said Arlo's metrics are moving in the right direction, and at less than one times sales he'd be a buyer for speculation.
Let's see what the charts of Arlo look like.
In this daily bar chart of ARLO, below, we can see that prices traded up into a spike high in late January. In the following five months prices gave back most of the gains. Prices are now trading below the 50-day and 200-day moving average lines. Trading volume has been light for months and the daily On-Balance-Volume (OBV) line has been edging lower, which tells us that sellers of ARLO are now acting more aggressive. The Moving Average Convergence Divergence (MACD) oscillator has just moved back below the zero line for an outright sell signal.
In this weekly candlestick chart of ARLO, below, we can see the past three years of activity. Prices hammered out a bottom in 2019, but the recovery rally has been disappointing and prices have slumped back below the 40-week moving average line. The OBV line and the MACD oscillator are both below their best levels and pointed lower.
In this weekly Point and Figure chart of ARLO, below, we can see a downside price target of $5.25 but further weakness looks possible.
Bottom line strategy: I find the charts of ARLO unattractive and weak.