Monday, November 23, 2009

Bookkeeping: Beginning Stake in Smart Grid Company EnerNOC (ENOC)

I believe this is the first time I've spoken about EnerNOC (ENOC) in the blog, but it is part of a very small niche in the market based on smart grid updates; perhaps 4-5 stocks in all.  Just in the past week or two a new ETF for this sector has been launched (symbol: GRID) which has 29 stocks, but I'd argue many are not pure plays.  I expect a lot of focus in this area by the political class in the future although many of the stocks had huge runs when speculative small cap stocks were more en vogue during the summer.  The key names have sold off sharply since then and ENOC is no different.

Technically, the chart is quite poor but we have a low risk entry point here so I am going to attempt it with a tight stop loss.  I am buying just under $25.00 as a long term "gap" in the chart from July 2009 just filled late last week.  It's been a horrific ride for any investor who jumped in after earnings, as EnerNOC jumped to as high as $35 not 12 sessions ago, but it's been a waterfall selloff since.  Aside from filling the gap, the stock fell all the way to the 200 day moving average in the $24.50s, giving back some 30% from it's peak price just 2.5 weeks ago. 

We can enter here with a stop loss below last Friday's low, essentially $24.  I have done this today creating a 2.1% type of position.  There is obviously zero momentum in the stock and this will potentially be catching a falling knife so if the sell off is not done, we will be exiting stage right with limited loss potential.  As for upside, there will be a lot of trouble breaking through the 20 and 50 day moving averages so we'll see how it acts.  Today could simply be a dead cat bounce and upside will be a moot point.

Please note - 1 gap filled, 1 to go... still a big hole under $20 from mid July.  Hence my caution in sticking around if the name continues it's selloff.


Fundamentally, this is a $600M company, with under 400 employees, which just turned profitable for the first time last quarter.  Company website here. Valuation is moot ... (as it is with the entire stock market) but this is the type of name that will move with investor sentiment and psychology.  Was it worth something in the $30s a month or 2 months ago?  Relatively arbitrary considering the profit stream is not there.

EnerNOC, Inc. engages in the development, implementation, and adoption of demand response and energy management solutions for the electric power grid operators and utilities, as well as commercial, institutional, and industrial end-users of electricity in the United States. Its solutions enable in optimizing the balance of electric supply and demand.

Latest earnings data from early November; the company trounced expectations.
  • Revenues - Revenues for the third quarter of 2009 were $103.1 million, compared to $44.2 million for the same period in 2008, an increase of $59.0 million, or 134%
  • Cost of Revenues - Cost of revenues for the third quarter of 2009 totaled $51.4 million, compared to $25.8 million for the same period in 2008, an increase of $25.6 million, or 99%.
  • Gross Profit/Gross Margin - Gross profit for the third quarter of 2009 was $51.7 million, compared to $18.4 million for the same period in 2008, an increase of $33.3 million, or 181%. Gross margin was 50.1% for the third quarter of 2009 compared to 41.6% for the same period in 2008.
  • Operating Expenses - Operating expenses for the third quarter of 2009 were $25.9 million, compared to $21.1 million for the same period in 2008, an increase of $4.7 million, or 22%.
  • Excluding stock-based compensation charges and amortization expense related to acquisition-related assets, non-GAAP net income for the third quarter of 2009 was $30.7 million, or $1.40 per basic share and $1.30 per diluted share, compared to a non-GAAP net loss of $0.3 million, or $0.02 per basic and diluted share for the same period in 2008, an increase of $31.1 million.

  • "We believe that we have reached an inflection point in our business. By nearly doubling our megawatts under management over the past year and continuing to drive operational efficiencies, we were able to eclipse $100 million in quarterly revenue and generate more than a dollar per share in GAAP earnings," commented Tim Healy, EnerNOC's Chairman and Chief Executive Officer. "We have positioned ourselves to achieve our 2009 objectives and deliver positive GAAP earnings per share in 2010."

  • Q4 Rev between $23-$25M
  • Q4 EPS between -0.50 and -0.57
  • FY Rev between $187-$189M
  • FY EPS between $0.23 and $0.30
A short video on the "niche" below

Long EnerNOC in fund; no personal position

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