Morningstar Rating

Stock Research and Analysis

by James Krapfel, CFA

Bulls Say

ADT's has strong competitive advantages that will prove more enduring than the market expects.
Operational improvement opportunities are underappreciated by investors. ADT is targeting a 3 times increase in its relocation recapture rate, reduced attrition through better credit screening, and a 10% reduction in its cost to serve per subscriber by 2016.
Newly introduced ADT Pulse expands the market opportunity and could lead to accelerated revenue growth over time, with an even stickier customer base. Read more 

Bears Say

Telecom and cable companies' early success in introducing competing interactive home monitoring and home control services is an ominous sign for ADT.
ADT has benefited from long customer tenure because of an exceptionally weak housing market. As more customers move because of an improved housing market, attrition will increase and returns decline.
ADT enjoys an unsustainably low cash tax rate in the single digits. Current free cash flows therefore misrepresent true long-term cash generation potential. Read more 

Management

Naren Gursahaney took over as CEO upon ADT's spin-off from Tyco in September 2012. Gursahaney served as the president of Tyco Security Solutions from 2007 to 2012, where he oversaw the global operations of ADT Worldwide. This deep understanding of the   Read more 

Profile

ADT was spun out from parent Tyco in September 2012. It provides home monitoring services, including burglary, fire, and carbon monoxide, to 6.4 million residences and small   Read more 

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