SmartRent, Inc. (SMRT) stock intrinsic value fair value estimate & owner earnings analysis

SmartRent sells smart-home systems to landlords. It sells and installs hub devices, door locks, thermostats and sensors, and charges monthly software subscriptions that let owners and residents control units, manage access and monitor properties. At the end of 2025 it had 890,870 units running its software and about 600 customers. These include many of the largest U.S. apartment owners, along with single-family rental owners and homebuilders. One customer has accounted for about 12% of revenue in recent years. The attractive part of the business is the subscription stream. Software subscription revenue grew from $41.1 million in 2023 to $51.6 million in 2024 and $57.8 million in 2025, and annualized recurring revenue reached $61.6 million at the end of 2025. Customers rarely leave: customers cancelling all service accounted for only 0.15% of units in 2025, and properties already on the platform spent 8% more than a year earlier. The hardware and installation side earns little or loses money. In 2025, hardware revenue of $58.0 million cost $52.8 million to deliver, and installation revenue of $21.1 million cost $26.2 million. Hardware revenue fell 30% in 2025, mainly because the company stopped bulk hardware shipments. Total revenue has fallen from $236.8 million in 2023 to $152.3 million in 2025. The core problem is that the company has never produced positive owner earnings. We measure owner earnings as operating cash flow with working-capital swings removed, minus stock compensation and minus all capital spending, including capitalized software. On that measure the business lost $22.0 million in 2023, $24.2 million in 2024 and $32.1 million in 2025, or about 11 to 17 cents per share. Non-cash items such as the $24.9 million goodwill write-down in 2025 are added back. Stock compensation, which ran between $8.8 million and $13.3 million a year, is counted as a real cost. Interest earned on the cash balance is left out of the operating figures because the cash itself is counted separately below. One accounting point matters. Older hub devices were paid for up front but recognized as revenue over several years. This 'hub amortization' added $15.4 million of revenue in 2025 without any new cash coming in. The company expects it to fall by $10.6 million in 2026 and almost disappear in 2027. We treat it as a wasting item: every case removes roughly $3.5 million a year of profit as it runs off. Recent results are better. Excluding the goodwill write-down, the operating loss was about $16 million in the first quarter of 2025. It then averaged about $5.5 million a quarter in the second half of 2025, followed by $5.1 million and $6.5 million in the first two quarters of 2026. Higher gross margins drove much of the improvement: about 40% in the first half of 2026 versus 33% for 2025, as low-margin hardware was cut back. Owner earnings worsened by about a third in 2025 compared with 2024, while our base case starts year one at a smaller loss of about $20.5 million. That starting point rests on four reported quarters of smaller losses, not on a forecast. After including stock pay and capital spending and excluding interest income, the current run rate is roughly a $19.5 million annual loss. The balance sheet is simple. At June 30, 2026 the company held $92.7 million of cash and had no borrowings. Its $75 million credit line has never been drawn and expires in December 2026. We treat about $15 million as needed to run the business, which leaves roughly $78 million, or about 40 cents a share on 192 million diluted shares, as spare cash. In 2025 the company booked $4.9 million of legal and settlement costs for a class action over its 2021 SPAC merger, which settled for $11.375 million in total. We treat that cost as non-recurring. All values below are discounted at 6%. What growth we credit: the only growth we treat as reasonably assured is software already sold but still being installed. Binding orders signed in 2025 carried $9.1 million of first-year recurring revenue. The company has also added units every year, including 2024, when customers cut spending. That record earns partial credit in the base case and fuller credit in the bull case. We give no credit to new products such as the AI and energy tools launched in 2025, international expansion, further cost cuts or price increases. Bear case: the current loss rate holds, subscription growth stalls (for example, because new installs only replace the loss of the 12% customer) and hub amortization runs off. That leaves losses of about $23 million a year. Over ten years those losses are worth about $168 million in today's money, more than twice the spare cash. The company would have to raise money or shrink sharply, and existing shares would be worth nothing. The company has no debt, so shareholders cannot lose more than their shares, and we put this case at $0. Base case: the current run rate holds and hub amortization runs off. Recurring revenue grows about $4 million a year for five years, roughly half the $8.2 million and $7.2 million added in 2024 and 2025, at about a 70% incremental margin. Losses narrow to about $8 million a year by year six but never turn positive. Ten years of those losses are worth about minus $93 million today, against about $78 million of spare cash. The losses therefore use up all the spare cash plus about $15 million more (roughly minus 8 cents a share). The company has no debt, so shareholders cannot lose more than their shares, and we put the base case at $0. We assume the losses stop after year ten rather than go on forever, which is the most generous way to end a story with no evidence of profit. Bull case: recurring revenue keeps growing near its 2025 pace, at $7 million a year for five years and tapering after that. The business breaks even around year five and earns about $8 million a year from year seven. Because the subscription base is sticky, we let that level fade gradually over the following decade. The ten years of cash flows plus that fading tail are worth about minus $3 million today. Adding the spare cash gives about $75 million of value, or $0.39 a share. What would make this wrong: the company could cut overhead faster than it has, or an acquirer could pay for the subscription base. Operating expenses in the first half of 2026 were $42.9 million ($11.7 million research and development, $9.7 million sales and marketing, $21.5 million general and administrative), an annual pace of about $86 million, which is far more than the subscription gross profit covers. The filings do not yet show either path. Margin-of-safety price: at today's loss rate, no price provides a margin of safety, because the losses keep eating into the cash. A margin-of-safety price applies only after the business proves it can support itself with four straight quarters of positive owner earnings while it still holds most of its cash. If that happened, the shares would be worth roughly the remaining cash plus a modest, growing subscription profit, around 40 to 50 cents a share on today's figures. The company is very small, loss-making and unproven, so the estimate requires a margin of safety of more than half. The margin-of-safety price, if that condition is met, is $0.20.