SmartRent Turnaround Stalls: Downgraded on Mixed Progress and Rising Costs

What happened

SmartRent reported improved gross margins but declining bookings and rising operating expenses, challenging the stabilization narrative. The company's revenue continues to shrink as hardware deployments slow, while SaaS growth remains modest. A $24.9 million goodwill impairment in 2025 underscores the unproven economics. Free cash flow burn persists, with cash declining to ~$100 million by Q3 2025. As a result, the stock is now rated just 'buy' rather than 'strong buy', with a lowered valuation target of $1.50+ per share.

Implication

Investors should monitor ARR growth, cash burn trajectory, and cost control. The current valuation at ~5x ARR offers limited upside without evidence of re-accelerating SaaS revenue and operating leverage. Until the company demonstrates a credible path to profitability, the risk of dilution or further downside remains elevated.

Thesis delta

The thesis shifts from a cautious wait to a more bearish stance. While the company retains strategic value and cash, the lack of tangible progress on bookings and expense control suggests the turnaround is stalling. The downgrade reflects reduced confidence in near-term recovery, though long-term optionality prevents a full sell rating.