Control4 Part of Home Automation Play That Hasn't Materialized Yet, Analyst Says

Control4 “bounced back nicely in Q4, meeting expectations and showing signs of stability,” Dougherty & Co. analyst Steven Frankel said in a note to investors Monday ahead of the company’s Thursday earnings call. But Frankel is looking for “a couple periods of solid execution” before making an aggressive prediction on the stock, given a history of “quarter-to-quarter volatility.” Control4’s “tuck-in” acquisition of Pakedge and “more disciplined spending” set the stage for “material improvement” in 2016, said Frankel. Dougherty is modeling $40.1 million revenue for Q1, compared with a consensus of $39.3 million and Control4 management guidance of $38.5 million. On the earnings call, Frankel will be looking for updates on the $600 EA-1 bundle, Control4's progress qualifying Pakedge dealers for Control4 installations and its ability to improve how leads are allocated to channel partners, said Frankel. He labeled Control4 “an extremely cheap stock” due to its track record, making it "difficult to have confidence in the numbers.” Macroeconomic issues have hit the company intermittently while “the home automation opportunity hasn't materialized as quickly as we would have imagined it would,” Frankel said. He attributed that to the rise of “simple music streaming devices” from companies including Sonos and the improved ease of use in products from providers such as Comcast's X1, which “made the motivation to adopt home automation in order to ‘uncomplicate home entertainment’ less compelling.” Control4 is focused on automating lighting, security and HVAC, said Frankel, who believes “these use cases are often better suited for new construction which may translate into longer sales/implementation cycles.”