The pending merger between Vivint Smart Home and Mosaic Acquisition Corp. (MOSC) will create the first public pure-play comparable to ADT (ADT), Goldman Sachs analyst George Tong tells investors in a research note. A comparison of the two companies' fundamentals shows that ADT has greater scale, EBITDA margins and free cash flow generation, contends the analyst. However, Tong points out that ADT's 6.4 times estimated 2020 EBITDA valuation multiple is below the 10.5 times 2020 EBITDA multiple implied by Vivint's merger agreement with Mosaic. He also notes that ADT is increasing its mix of smart home monitoring installations and commercial revenue, both of which have higher revenue growth prospects. Tong reiterates a Buy rating on ADT with a $10 price target.

Backs FY24 revenue view $4.8B-$5B, consensus $4.92B.