Wednesday, November 10, 2010

Bookkeeping: Restarting EnerNOC (ENOC) on Disappointing Guidance

Usually I try to buy relative strength, but we have a relatively defined entry point on EnerNOC (ENOC) so I am going to attempt a more atypical trade.  Technically, the stock has bottomed out in the mid $24 to $25 area twice in the past year, and is back here today after a devastating day yesterday. Normally stocks that gap down like this, stay down for weeks if not months but as I've shown in other pieces lately this strange market will bid up anything and we have seen many immediate reversals.  I am not necessarily counting on that but for a long term hold, there is some value here in terms of a range bound chart.  ENOC has essentially been in the $25 to $37 range for a year with multiple round trips.

With the stock just over $25, I'll begin a 2.1% stake and offer a 3% berth to stop out somewhere near $24.45ish if the stock creates new lows.  Sellers should be washed out very shortly.  Last time we held this, it was sold out of the portfolio near $30 in late March.

EnerNOC, Inc. is a leading provider of clean and intelligent energy solutions, which include demand response, energy efficiency, energy procurement, and emissions tracking and trading services. These solutions help optimize the balance of electric supply and demand, provide cost-effective alternatives to traditional power generation, transmission, and distribution infrastructure, and drive significant cost-savings for end-use customers.

As for the earnings report that caused this, it was fine but the guidance was the issue.  There have been quite a few cases of curious over reactions to what I thought were ok reports / guidance of late.  EPS quarter vs quarter is all over the map for this company (some quarters flat, some quarters big losses, some quarters big profits), hence a lot of earning hiccups as the business is very lumpy.  In the 3rd quarter expectation was for $1.56; the company came in at $1.81 (non GAAP).  Revenue up 58%, coming in $2M above estimates.

In terms of fourth quarter guidance, the company came in below expectation:

  • For the fourth quarter the company expects revenue between $20 million and $24 million and a loss of between 80 and 90 cents per share. (non GAAP loss of 62 to 73 cents)Analysts expect revenue of $29.4 million and a loss of 64 cents per share.

Which put some disappointment in the full year guidance
  • For the year, the company said it expects revenue between $277 million and $281 million and net income of between 32 cents and 42 cents. (non GAAP profit of 91 cents to $1.01)  Analysts expect revenue of $285 million and net income of 41 cents per share.
What has been strange about this company is almost all analysts live in a non GAAP world. yet for some reason ENOC is held to a GAAP standard.  

But that's neither here or there; we have to see if the stock can hold the low end of the yearly range.  If so, a nice bounce opportunity.  If not, we'll be out with a small loss.  For very patient investors, it should be back to the low to mid $30s sometime in the next 12 months hence it should offer 30-40% upside.  But with other stocks such as Silver Wheaton doing that in 7 days it is hard to wait quarters for that sort of return. ;)

[Nov 23, 2009: Bookkeeping - Beginning Stake in Smart Grid Company EnerNOC]

Long EnerNOC in fund; no personal position


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