Despite Google’s (NASDAQ: ALPHABET) monstrous size, they are always looking for new markets to tap into and dominate. Yesterday the tech giant grew its market foothold in the home security space after investing $450 million into ADT. ADT supplies secuity for residential and small businesses throughout America. The partnership triggered a buying frenzy on Wallstreet as ADT soared by 75%. The hype is starting to settle, but investors wonder whether we could see volcanic activity in the coming days.
Table of contents 1. A digestible breakdown of the Google-ADT partnership 2. Why home security is bullish in the long-term 3. Everything you need to know before investing in ADT
Breakdown of the partnership
The partnership simply represents Google adding ADT home security systems to expand its nest line of products. Google’s Nest line includes thermostats, smoke detectors, smart doorbells, and many more. The $450 million investment will see Google acquire 6.6% of ADT in Class B shares. Essentially, Google will have no voting rights within ADT but access to their products. Investors interpreted the partnership as the beginning of a new chapter in ADT’s business life as they look to create the next generation of home security products. The bulls instantly rallied behind the catalyst propping up ADT by 75%. At the moment, ADT is still up 58% since Monday’s announcement. Therefore, suggesting an underlying confidence from ADT investors.
The megatrend of Home security
Security is becoming increasingly important as the world evolves. Especially in times of crisis when crimes rates go up. Ultimately making the home security industry a bullish emerging market. However, consumers will only place their wallets with security brands they trust. While Google is under the spotlight for potentially abusing its power in advertising and data sharing, society still subconsciously trusts the tech giant. Because Google is the most pervasive brand in technology realm. Thus, if Google, alongside ADT, can cement themselves as the home security captains, investors will flock towards each company.
Everything you need to know before investing in ADT
Before I begin, I am obliged to remind our viewers that this is not financial advice but rather investment commentary from extensive research
Most Investors see a stock jump 70% and instantly scream pump and dump. However, ADT defied the odds on Monday as they only fell by 10% after the announcement. ADT currently trades at $13.48 but is at 13.31 in the pre-market (at the time of writing). Considering that ADT’s resistance and support levels are around $15.30 and $13.40, respectively, the current price offers investors a potential window (opinion not advice). Because ADT is near its support level that should ignite a buying party, which should run the stock up to, but necessarily above, its resistance levels. However, YIG would like to point out that if ADT drops pass its support levels then that would trigger significant selling pressure. Hence setting a stop loss around the support levels would help mitigate the risk in your investment.
Growing market bubble
Tech stocks are soaring to new highs every day, which is the driving force behind the steroid like stockmarket gains. To put the extreme growth into perspective, the NASDAQ is 11% higher than what it was before the coronavirus. The recent Google-ADT partnership should be enough to maintain a strong bullish sentiment for the meantime. However, a bursting of the stockmarket bubble could see ADT fall just as much as it climbed. YIG does not expose the potential bubble to discourage ADT or Google investors but to simply provide a balanced perspective.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG.