I see 3 scenarios. They're kind of generic, but flavored by ENOC's unique history of reaction to its earnings:
1. Worst Case - assigned probability 15% - Major regulatory/PJM issue, and/or significant earnings or guidance miss. PPS plummets depending on severity.
2. Best Case - assigned probability 25% - Saas vision articulated and integrated into guidance that demonstrates a revenue stream and contribution to earnings. New acquisition(s) have strategic (and/or accretive) value not previously understood. Europe, Japan, Australasia ahead of schedule with contribution to earnings coming on line sooner than expected. PPS spikes, although some already happened in the recent anticipatory run-up.
3. Mid-Range Case - assigned probability 60% - This is the one I'm worried about (vis a vis the current pps) -- Earnings beat, nothing extraordinary, but a beat. Free cash flow continues to grow. The 3-year, +15% top and bottom line guidance provided in the last report is maintained. Everything is status quo, with maybe some offsetting negative and positive news items. Possibly exciting potential about the most recent acquisitions focused on, and the SaaS vision flushed out further, but its contribution not quantified. PPS gaps down, because the current $24.00 is 32X current year GAAP earnings of $0.75 (consensus-mid-point).
Would 32X be a crime? Not if we had a vision that was further down the road to reality.
In my view, if this thing were to achieve the Global and Energy Intelligence vision laid out publicy so far, the things the Company is doing - what is happening now - would be EXACTLY what WOULD be happening. We're heading toward something big.
That's so exciting, but it's always been the story of Enernoc. There is no proof yet that this story stock can make the big numbers, 15% growth won't do it, 3 years is an eternity, but GO ENOC because what they're doing, I think, is amazing.
JP – Nice encapsulation. I’d like to add some surprising upsides in the short run that have not been mentioned on this board at all. One is the story in the NYISO where revenue for DR is set to double and expand. Go to Greentech Media and search New York Demand Response and you’ll see what I’m talking about. This will be an immediate benefit to EnerNOC’s numbers in 2014 and I believe could be a catalyst for increasing their revenue numbers.
Another potential other catalyst I believe in recent highs is the Supreme Court’s decision to uphold the decision to regulate smog generated from coal plants that cross state lines – this will create additional pressure on the coal industry and increase the attractiveness of renewable energy and demand response.
Regarding The EIS SAAS solution – EnerNOC is right on the money that this is a huge market but here are the biggest hurdles: Customer education, customer adoption AND differentiated markets. A customer in the PJM marketplace is going to have different EIS challenges than a customer in the PG&E marketplace. This is not a straightforward cookie-cutter, one-size-fits-all application that is needed. Throw on top of that the varying challenges on how the customer needs the EIS to work and you have a very complex system that needs to be created. I’m not saying it’s a pipe dream, but I believe they are just in the process of laying the groundwork of getting there at this point and are still 2 years out from the holy grail.
I would like to see Neil Moses articulate the basis, size, build -- anything about the SaaS revenue and/or earnings stream, including commentary on cannibalization of the current business.
Management invested a lot - for a long time - in branding Enernoc as a DR company. You can't pivot from this core identity and not re-make the case for SaaS with at least the same vigor. Not sure what Marketing at Enernoc looks like, but there is an important communication need (and opportunity)here that to me, at least, is falling flat.
In this call, they don't have to show us the money yet. Just show us the QUANTIFIED bridge to the money. Sell us a bridge, at least. If not, and the story is 15% growth and a vision, then 24 won't hold.
If they do, then you'll see $30.00, multiple be dammed, I agree.