...and seeing 15% earnings growth forecast for three years. That's it.
The recent acquisition is qualitiatively very interesting, but not accretive to earnings in any significant way.
Europe, Japan and Australiasia are awesome, but they've been baked in.
PJM is still a big piece and still a risk. Even a headline risk.
So I think, still 2 weeks before earnings, this is one of those times where the pps got ahead of itself again, given the markets bounce (which may be fading in the existing downtrend), all of the PR's the other day, ENOC's continued "story stock" attraction and the thin float.
They're gonna have to SHOW something on the revenue and profit model, at least, for me to buy into a multiple increase or earnings-driven increase.
Shorting a company like this seems extraordinarily risky. What they have done so far in Europe , Japan and Australia may be baked in and 15% growth the current forecast but news could come out of any of those areas or the West Coast or Texas at anytime and change everything. Kind of like when ENOC was at $6 and Australia started to take off, at least I think that is what started the turn around and a stretch of several quarters of increased guidance.
I recently read an article on Green Tech Media, " German Demand Response: Almost Ready for Prime Time". Maybe it will be another year before things take off, maybe this summer. Here is an excerpt from the article,
"“In the next two years, Germany is our biggest opportunity in Europe,” said David Brewster, president and co-founder of EnerNOC. “But we’re very bullish about the opportunity for demand response in Europe as a whole.”
In 2010, very little of EnerNOC’s revenues came from outside the U.S. By 2013, about 20 percent of revenues came from abroad. While the U.S. market and the Australian market grew out of the need to shave off kilowatts when electricity demand is high, the German market is all about balancing services.
There are three levels of ancillary services in Germany, Brewster explained: primary, secondary and tertiary.
Primary is closest to the practice of frequency regulation in the U.S., which requires dispatch times of just a few seconds. EnerNOC is mostly working in the other two markets: secondary, which is similar to operating reserves and requires a five-minute response time, and tertiary, which requires a fifteen-minute response time.
The secondary and tertiary markets each need about 2,500 megawatts in each direction of positive and negative demand response, said Brewster. Germany is unique in that it needs demand response providers to drop load (positive DR) to balance the grid, as well as to increase their load when there is more renewable power than the grid can handle. In total, there are about 10 gigawatts of load needed.
I'm generally long ENOC for all of the reasons you stated. The volatility, however, offers opportunity for trading around a core position.
The story stock nature of Enernoc's business, combined with the thin float and (what seems to me like) a fair amount of market maker manipulation drive this.
Currently, the $23 pps is approximately 30X current earnings, and 20X+ forward earnings. For comparison, Apple's multiple is something like 12X (not sure exactly, but close).
The opportunity you described does not exist in a vacuum. Yes, Demand Response "Penetration" will grow. But what about Enernoc's share of this business versus its competitors? The payout in Europe is a ways out. The further out you go, the more risk there is of technology, financial, political, competitive, and all other sorts of disruption versus today's vision.
In Japan, there are several players competing.
It was in recognition of these limits on the size and composition of the DR Market that ENOC diversified, first into efficiency and sourcing -- and then into a SaaS integrated approach.
While super nifty, timely, relevant and utlra cool, I have seen no revenue, earnings or cash flow models for this re-flowed company, and the Company itself has told us to expect 15% growth annually for 3 years. Not the stuff of a 30X multiple, and why I think we're overstretched here at 23.