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Amazon purchased the smart doorbell maker Ring for $1 billion to help the company jump an important hurdle in its Amazon Key delivery business. But it could also deal a painful blow to ADT, Calacanis said, if and when the combined company puts out smart alarm products. “They’re going to take the cameras and the alarms and put it together and the big loser in this will be ADT,” he told CNBC’s “Squawk Alley.” ADT charges thousands of dollars for installation and a steep monthly fee for continued service, Calacanis said. “People absolutely hate that company, and now there’s new products that are coming out where there’s nothing down, $20, $30 a month for the service to let the alarm company know, and you can install it yourself,” he said.

ADT is currently America's #1 home security system provider. But with DIY competitors backed by behemoths like Google and Amazon getting into the space, will ADT's competitive advantage continue? ADT, backed by Apollo, IPO'd in early 2018 at $14 per share and has been a long slide downward ever since. With over $10 billion of debt and concerns over growth, analysts have cut their price targets. But can ADT continue to maintain its 7M subscriber base, continue uptake of its digital ADT pulse product and hold back the competition? What are the odds of a 2x in 2 years?  A 3x in 5 years? A complete wipe-out?

The global security market is slated to surpass $100 billion by 2020. Home security systems will account for an estimated $47 billion of the total security market. The main drivers are: 1) Tech upgrades are hugely expanding the functionality of electronic security systems. This includes wireless integration and other "smart home" features that provide greater flexibility and convenience for consumers. 2) DIY home security solutions--in which homeowners install and monitor the systems on their own--are in high demand. ll told, DIY systems are on track to take over 34 percent of the home security market by 2020. They're also projected to account for more than 62 percent of the market by 2035. 3) Millennials' consumer preferences are spurring growth across industries, and the home security market is no exception. DIY home security solutions are especially enticing to consumers under the age of 45. 4) The profitability of home security systems has become ever more apparent. That's resulted in intense competition within the industry as startups and big-name corporations duke it out. While the Home Security market is growing rapidly, the competition is increasing and DIY solutions are becoming more prevalent and this is likely to lead to customer attrition for ADT

Shares in Boca Raton-based ADT, the security provider that went public in January, took a fall after Amazon in February announced its $1 billion acquisition of Ring, a maker of systems that connect doorbells with security cameras. Amazon’s move opens the possibility of the Seattle giant disrupting the new market for do-it-yourself home security, a fast-growing category that threatens to squeeze ADT and its long-established model of installing elaborate systems and insisting on three-year contracts. According to Consumer Reports, signing up for service with ADT would cost $2,425 over five years, including $925 for hardware. Do-it-yourself systems are significantly less expensive, costing as little as $620 for hardware to cover 15 windows and two doors, and nothing for monitoring. Amazon isn’t the only tech company eyeing ADT’s market. Google owns the home-technology company Nest, which is pushing cheaper alternatives to traditional security monitoring. In a March conference call, ADT Chief Executive Tim Whall acknowledged new competition from tech giants. “Now you see Google Nest coming out there with products,” Whall said. “You see Amazon, potentially Apple.”

After pricing its initial public offering at $14 back in January, the home security company has seen its stock price plummet to around $8. Investors have soured on ADT's prospects -- and for good reason. In fact, here are three reasons ADT's stock price descent may not yet be over. 1) Intensifying competition: A new company is starting to make a name for itself: SimpliSafe. With far lower equipment costs and easy, do-it-yourself installation, SimpliSafe offers consumers an attractive value proposition. And they've been signing up in droves; more than 2 million people have already become SimpliSafe customers, making it the fastest growing home security company. 2) New entrants: Ring makes camera-equipped doorbells and other security video equipment, and it recently debuted a comprehensive home security system with alarm monitoring priced at only $10 per month. Ring's equipment costs and monitoring fees drastically undercut those of ADT. In addition, Ring's home security system is expected to add full integration with Amazon's Alexa smart assistant platform. This newfound competition with Amazon may further slow ADT's customer growth and make it much more difficult for ADT to raise prices, which could severely crimp its profit margins. 3) Debt is a burden: ADT's nearly $10 billion in debt -- compared to only about $260 million in cash -- is another risk factor for investors. The cost to service this debt will continue to weigh on ADT's profits for the foreseeable future.

Strong ADT Interactive growth necessary to offset traditional weakness. The combination of both Pulse and the recently released Control, ADT's home automation offerings,now have ~3.05M total users and has averaged quarterly user growth of ~14% since the beginning of 2017. This strong growth within ADT's Interactive offerings has helped to offset declines in its non-Interactive business (primarily ADT's traditional offering), which we estimate has averaged a 7% quarterly decline since the beginning of 2017, but still represents ~50% of ADT's customer base of ~7.1M customers. Besides faster user growth, ARPU within Interactive is also higher than ADT's traditional offering, with pricing running ~$50+/month compared to the traditional offering closer to ~$40. This pricing differential compounds the importance of Interactive growth,as revenue from Interactive customers needs to grow at a significant rate to offset customer losses within the traditional business.

The emergence of DIY security options (e.g., SimpliSafe, Frontpoint, Nest) and Amazon’s acquisition of video doorbell maker Ring have ratcheted up discussion and angst around the competitive landscape and ADT’s positioning therein. No doubt, we see DIY as having a place in the home security landscape; however, we do not believe it represents ADT’s demise. We believe DIY is well suited for apartments, condos or small homes (and perhaps renters), but less effective for ADT’s core demographic of homeowners with families. In our RBC Home Security Survey, just 15% of responders indicated they felt DIY was as good as professional installed/monitored service, whereas 30% said they don’t trust the service. Thus, we see DIY as a way to expand the monitored security market, from the current ~20% penetration where it has been for some time. We see opportunity for ADT to capitalize on a growing market via its offerings and outsourced monitoring, gaining access to a previously untapped market.

In a survey of 3,001 adults in the U.S., only 38% of Americans own a home security product. The survey also showed that younger cohorts (18-34) are more likely to own a security system.Younger generations are more likely to own some kind of home security device than older generations, especially less expensive DIY options like smart locks and self-monitored systems. Younger generations are digital natives and are more comfortable with tech in the house. As this generation gets older, they may opt to combine a professionally monitored system with IoT devices such as Nest, Alexa, etc (ADT Pulse integration)