Alarum: Data Collection Business Is A Hidden Gem And AI Beneficiary

Investment Thesis - Alarum Technologies is an Israeli company focused solely on its enterprise data collection solutions business, NetNut, which now accounts for 96% of its revenue [2] - NetNut provides IP proxy services and data collection tools that enable enterprises to access websites anonymously and scrape data, essential for accurate business analysis [3] - The company is positioned to benefit from the growing trends in big data and AI, with expectations of 90% revenue growth for NetNut next year, while currently trading at an 18x forward P/E, which is considered low for a SaaS company [2][4] - Alarum's stock has seen a significant increase of 1500% over the past year, primarily due to the exit from unprofitable business lines, allowing for clearer financial reporting of NetNut's performance [2][4] - The stock is rated a STRONG BUY with a target price of $40 [2][13] Business Overview - NetNut's services are crucial for enterprises as they help avoid misleading data collection and website access issues caused by IP address restrictions [3] - The company has launched several new products, including the SERP Scraper API and AI data collector, which are expected to drive future growth [6] Financial Performance - Alarum reported strong Q1 2024 results, with NetNut growing 139% year-over-year, gross margins at 78%, and net profits increasing to $1.4 million from a loss of $0.7 million a year ago [4] - The company has improved its cash position, with $15.1 million on the balance sheet, indicating no future cash flow problems [4] Market Growth - The data collection and labeling market is projected to grow from $2.2 billion to $17 billion from 2023 to 2030, representing a CAGR of 28.9%, benefiting companies like NetNut [5] - The residential IP proxy market is expected to grow at a CAGR of 11.5% from 2024 to 2029, still above GDP growth [5] Valuation - A 5-year DCF analysis suggests a target price of $40, based on a high initial revenue growth rate of 90% and a terminal P/E multiple of 25x, which is justified for a SaaS company with recurring revenues [8] - Alarum's current valuation is considered attractive given its growth potential and market position [13]