Alarum Technologies: Speculative high-risk high-reward setupTechnicals
Trend : While the daily chart is unmistakingly in a downtrend, the weekly looks more like a massive correction. However the uptrend that began in early 2023 has clearly been broken.
Price Action : Last week showed some bullishness, with a bounce from the 2020 shoulder support level and and a break above the falling wedge on the daily. Altogether the move hasn't been very decisive though and it faded with a reversal bar on friday. However ALAR hasnt fallen back below wedge support.
Momentum, Volatility and Volume have all been below average reflecting lingering interest in the stock.
Company Overview
Alarum Technologies Ltd. operates in the webscraping/data collection niche, primarily through its subsidiary, NetNut. The company provides IP proxy network (IPPN) services, enabling businesses to scrape and collect web data securely. Recent expansion efforts focus on the growing AI-driven data collection and labeling market, with products like the Website Unblocker and an upcoming AI Data Collector designed to automate and enhance data retrieval.
Current Situation
Q3 2024 Revenue of $7.2M, hitting the high end of guidance (+6.6% YoY) with NetNut contributing 97% of revenue.
Adjusted EBITDA of $1.4M, exceeding guidance but down YoY due to infrastructure investments.
Strong cash position of $24M and only 1.6M in debt.
Secured a Fortune 200 client, with potential for traffic (and revenue) to triple within 6-12 months.
Usage-based revenue model introduces short-term revenue volatility, while gross margins declined (73.6% vs. 79.4% YoY) due to network investments.
Short-Term Outlook
Q4 2024 Guidance: Estimated revenue of $7.5M (±3%) with EBITDA of $1.3M-$1.7M.
Near-Term Catalysts: Further Fortune 200 client expansion, adoption of Website Unblocker, and new AI Data Collector launch.
Potential Risks: Revenue fluctuation due to usage-based pricing, competitive pressure and reliance on short-term client contracts.
Conclusion
ALAR presents a high-risk, high-reward trade setup, with catalysts for upside momentum but also operational risks that could weigh on stock price movements in the coming months. The ongoing AI technology democratization, high operating leverage and a 1.5x EV/Sales valuation make me favor the upside whith a strict risk management recommended.
