I'm trying to understand the problem PJM has with Demand Response generally, and with Enernoc, specifically.
Is it that Demand Response, as a capacity resource, is relatively cheap (and efficient)? Therefore, if limits are not placed on the amount of Demand Response Capacity imported into the PJM System, pricing system-wide is negatively impacted. This reduced pricing does not meet the minimum hurdles of traditional generators also bidding to supply external capacity, economically displacing them.
PJM says this is a matter of system reliability - that the economic displacement of the traditional generators lessens availble capacity resources, to a threshhold below which PJM can maintain system reliability.
Is reliabilty the root issue, or is economic displacement the root issue?
You pointed out that it's the 2017/2018 BRA that's impacted. I see that. I guess the issue is not 2017/2018 specfically, but whether the proposed revisions funamentally dilute Enernoc's business model -- not only for that year, within PJM, but generally. Is this the bigger question, and if yes, to what extent are PJM's concerns generic, a headwind to utilities' broader adoption of DR?
I have followed ENOC for years but I am not in the industry.
I was too hasty earlier, saw only the pilot, along with the others, and wasn't impressed. But I went back and read the press -- the exclusive arrangement does appear to be well past the pilot phase, I agree.
Time to get back in? I took away from Healy at Baird that International has been replacing the PJM shortfall almost one for one (about 20% of revenue lost/gained). I don't know where this exclusive arrangement in Japan fits in. As far as my making a call, the last time I tried to do that, I may have turned the poster Chow Mein into sub-gum! So I'm not going there. I did stop out a bit earlier than you, and for what it's worth, I've taken a small long position today. I see this new opportunity, but also, the timing in terms of earnings being a ways off.
Thing with earnings -- and this period being down -- it's always been about no catalysts. I do wonder whether today's news -- and the increasingly broad coverage I"m seeing for Enoc (in tems of who picks up these stories), I wonder if we may not have seen the bottom of the "between earnings lull." But I have no idea, no idea whatsoever!!!!!!
In terms of the PJM revisions -- What I DO see is the fundamental aversion that PJM has for Enernoc. The demand response document from 11/29 wreaks of "Enernoc, get your hands off our grid, you don't run our business, we do" language. Healy spoke about this, saying it "is what it is."
As I have stated before, I don't understand the impact on ENOC's earnings of these proposed revisions, but as an investor, I would want some reassurance that Enernoc is shifting its mix to trade out these losses, and then some.
Maybe today's news about Japan -- the exclusive agreement part and associated revenues and profits, is it.
Why, if a poster were legitimate, would he/she create an alias to mimic a frequent poster to create confusion? This is the scourge of these boards - the alias "PJMarketer" (note, my alias 12-years on Yahoo is "JPmarketer").
The "PJmarketer" post was just created, and the ENOC post was its first.
The season between November and February earnings has traditionally been a no news/drift down period for ENOC. It gets shorted heavily. The shorts just got killed on the strong earnings and Japan announcement.
I think we've seen covering as a result (some of the recent rise). I don't know how to check out current short interest, but I believe it's very high (seasonally) for ENOC. With this Japan-driven reversal and the growing realization that PJM headwinds are becoming less and less relevant, short sellers must be getting ready to cover en masse. And options expiration coming on Friday. Time is up. That's why the "House of Cards" post just appeared.
How many posters were around in exactly this type of situation when we experienced the last short squeeze? ENOC rockets on these occasions. We appear primed for another.
I don't agree with much of the substance or "color" the impersonating poster put in the "House of Cards" post, even the title of which is filled with imagery/designed to frighten.
In a case like this - with the heavy, seasonal short interest, and with options expiration coming - some, maybe many, are in a heap of trouble here.
I think we see increasing volatility here throughout the week, and possibly a short squeeze depending on where the pps goes. Universal consensus is building that Enernoc is significantly undervalued for all of the reasons discussed here by legitimate posters - pro and con - over the past few weeks.
My concern (about buying in more at this point) is that international is baked in (into the 80 cents earnings for 2014) but the PJM revisions, if they happen, are not.
In the case of a negative ruling, with any substantial hit to revenue, today's pps may not be sustainable. That will happen all of a sudden, any day now, with no warning and I don't want to get caught (been there done that). That's why I"m asking if any knowledgable posters can help with - what's the worst cast PJM outcome, and a stab at what it would mean to revenue, gross profit, and/or earnings. It's a very binary event, and my belief is that with Enoc's slim float, the stock is going to run one way or the other.
Silly Sally, I appreciate that you have a long term perspective. I offer respectfully that ignoring this risk, justified by our being here, may not be in our collective interest. Look at the history of the last PJM revisions and stay vigilant. Depending upon the degree to which (unproven) international, software and other revenues can supplement the core DR business, the PJM ruling could be big, not only in terms of short term pps, but long-term, structurally for the company.
Again, invite opinions, pro or con. I recognize that for longs, discussion of risk factors (ofen disguised bashing) can be uncomfortable. I have had an equal number (if not more) posts recently that could have just as easily been interpreted as pumping. No pump, no bash.
I have a long bias on ENOC, but I'm VERY wary of the short term plunges and spikes this stock is capable of.
Consensus earnings growth is only 10% YOY 2014/2013, with significant downside event risk any time between now and earnings.
December blip is exactly that. It will be seen quickly to have been overblown in GM's pps at the current 2014 forecast earnings and multiple, which is nowhere near at risk based upon December's data.
It's a long time between now and the end of the year, and all of that time is guided by Enoc at midpoint of .75 GAAP. Even with a 25X multiple, that's a price per share of $18.75. Best case FY 2014 earnings of .80, with a best case multiple of 25X, yields a price per share of $20.00.
Samgean hit it right on the head. if the valuation methodology changes to that for an SaaS company, then per his/her numbers, we could go higher (i've learned from his/her post). But I just didn't get any info, warm feeling from Healy, or anything on this. In fact, he got pretty nasty when pressed just on this topic, and that was not encouraging to me, given the lower than consensus guidance. For any of you who listened to the call, did you hear him on this topic? He bordered on rude, and clearly didn't want to quantify anything.
None of the new stuff is coming online in 2014 (incremental earnings-wise, at least) and PJM is still forecast to be 1/3 of Enernoc's business for the full year. It seems to me there is so much that can happen between now and next year -- technology, competitors, so much stuff, the segment is so dynamic. And they've pegged earnings at .70-.80, rght where we are now, virtually no earnings growth this year.
So I'm not buying at this point. Gonna wait to see where this settles out.
Mr. Healy has started to articulate the size of the respective markets, and the Company's ability to gain share.
I would like to see him make a more direct - versus conceptual link to earnings - some type of language about the magnitude of potential growth - responsibly, and within the constraints of being a publicly reporting company.
I think he can go further.
Shabdul - thanks for your awesome response! You have provided some real insight into the structure of the DR marketplace, and you've put the competitive aspects in context.
I've started studying up on the Company's efforts in Japan. I agree - it's a completely different situation (vs US PJM), where the Japanese government and the utilties are actively seeking short and long-term solutions to the capacity removed by their nuclear policies post-Fukushima. Working up with them like they did, was great. And Enernoc seems to be placing significant resources in place for this venture.
Thanks again for taking the time to lay things out like you did.
The operative issue is whether Japan and other international (and software revenue and other profit centers) more than offset any loss from PJM through the revisions, or otherwise. Specifically, what does next year's consensus earning of $.80 look like now? I think the market is telling us past two days that the recent upgrades by Baird and Cannacord to $24 and $30, respectively, are on track.
Market collapsing, Enoc is rising/bouyant since the Japan announcement. It's bad time of year and the taper talk leading into the FOMC meeting next week is dragging everything down. But it looks like ENOC wants to go higher.
It's a good development - Enernoc's participating in Japan's/Tepco's broad based program. But the impact on Enernoc earnings remains to be seen, and should be negligible in 2014 and 2015, if they ever develop at all. They're in late (behind Schneider/Energy Pool and Othes) so gaining market share will be hard fought.
After Fuskishima, Japan is testing literally hundreds of pilot programs of all sorts, and Enernoc's joint venture is one of them. Demand response is at the earliest stages of development in Japan/will takeyears to monetize.
Just googl Schneider/Energy Pool. Energy pool is the largest aggregator in France with 80% of the market, around 1600 MW under management. Look at the 11/25/13 announcement (2 weeks ago) heralding the Schneider/Energy Pool program, already well underway...
On Friday, Japan’s Tokyo Electric Power Co. (TEPCO) announced it is working with Energy Pool and Schneider, along with Japan’s Sojitz Corp., to set up a 50-megawatt industrial demand response pilot, under the auspices of Japan’s New Energy Promotion Council (NEPC). The goal is to test industrial demand response, not just for peak power mitigation, but also for “reserve capacity in the event of a unexpected outage of generation units, as well as balancing capacity for supply volatility caused by renewable energy,” the announcement stated.
It's not at all settled how capacity will be monetized in Japan. Just look at wha's going on with PJM, five years in.
And by the way, I read the 30 or so pages of the 11/29 submission by PJM, but I didn't yet listen to the CS conference. If Healy characterized PJM's objections to Enernoc as a seasonality issue, that's just not true. PJM has serious concerns about the reliablity of its network given its (PJM's) decreasing ability to control the mix of curtailment activities. It's a fundmental argument against expanding DR within PJM beyond limits where PJM can guarantee its grid reliablity - and the same issues are going to arise in Japan.
I apologize. I missed the piece about their having and exclusive program with Marubeni in addition to the pilot. This is significant, although I would hope the company could elaborate on impact to earnings 2014 if any.
Agree. Question is re-entry point. The loss for having played is going sub-$1.00 now, at about 3:55 pm.
I just know as soon as I start buying, the dip will come. It's inevitable!
Motsam, the pps is already up around 20% in this spike. This equates to GAAP earnings of about a buck versus current consensus .80. That would be an amazing 2014, in light of the current forecast.
I'm having trouble with the mechanism that would propel the stock price further (excluding potential for acquisition). Is it the multiple, that goes to, what, 30, 40 (from the current 25x), for a company that does business with regulation-constrained utes?
Or is it all (the lift) a combo of potential to be acquired, and sentiment/a pile-in to the segment, P/E be dammed? One can't argue with the movement. I'm looking for the reason, especially if a large part of the volume is institutional.
The FERC decision on PMJ's proposal, and ENOC earnings. Both are first week in February (if FERC takes the full 60 days - give or take a few days, I think).
I don't know what Japan or other International businesses that may have become accretive will add to the current 2014 consensus eps of .80.
I didn't see the pump in the penny stock paper. I believe that the PJM outcome (whether a declining percentage or not, it's still big) and international becoming accretive, such that it impacts eps, will be what ultimately impact the stock price.
We also have a month until these events occur, so it's a time that offers both opportunity and risk. Swings are the rule.
Could Shabdul or another poster venture a guess about the impact to earnings (or at least revenue) of a negative PJM decision? Concern is that a negative decision would be significant, whereas the international businesses will take some time to seed, offsetting the loss.
2014 earnings are only forecast to grow about 10% net of these two things. That's the starting point.
Silly Sally, you're in a tempest. That' the 9th time you called me something bad.
We produced an internal company communication for the legal department. It didin't even have anything to do with DR. it was a Human Resources Issue.
I'm not in the industry. Please cease posting to me.
Your clearly pumping, with no knowledge of the business. You have not addressed one business issue. You're apparently not capable of doing so. So when you lose face like this, being asked specific questins about earnings, the business, all the things the other posters and I have been talking about, you go violent, attacking, accusing other posters of chat board agenda's and such.
I don't care if you're a male or female, you're a nut job. Get lost, stop posting me. I don't want a #$%$ match on a chatboard with a nutjob. It's been a great board ad hopefully you will try to add something otehr than mindless "good luck longs" drivel. Total drivel.
I've taken the last few minutes to read your posts. Potatoe?
Listen, we've got a great board here. Just look at the substance of the posts by Motsam, Stacker, Shabdul and so many others.
This board has been like a little oasis in a sea of pumpers, bashers, trolls and misfits.
It's an incredibly interesting company, complex, as are the markets it operates in, with more than its fair share of risk and oportunity. The dialogue about the business has been rich and informative, especially past few months.
I have asked you to join that dialogue, even offering specific points for your commentary (i.e. the .80 eps and its prospects) but you have refused, instead focusing no less than 6 or 7 times on calling me some type of manipulator.
My history w/Enoc has been as a long, trading in and out over the years, capitalizing on the volatility. I trade thru E-Trade. They hever had Enocshares available before to short - only past couple of months.
I am a marketing guy by trade, I have worked with Enoc (on one occasion) and I am personally known to the Company.
Sal, you can't control the dialogue by villifying other posters. I know it's uncomfortable to hear discussion (espcially good discussion) when it's directly counter to your postion - your money. None of us here has a crystal ball. But I've been in business for 33 years and I've very confident looking at all sides, which must be done to see anything at all. That's my thing. I look at the business.
Your things, including options, structure of the market (the market makers), and such, I know little about and would welcome some schooling, if you're so inclined. I recognize that there are more sophisticated/effective ways to make money, although my long/short strategy does work for me.
On this last go-around, I caught the upswing, and now, short, am significantly above water.
At the current pps ($22.27 at 12:39 pm EST), a 25X multiple (current year) would require earnings of around $.89, versus the current consensus estimate of $.80 on sales of $447.53 million (when all settles out).
The .89 is about 11% higher than current estimate. So the offsetting developments of late -- unfavorable FERC order -- versus the positive -- Japan, Australia, Europe potential, world estimates for DR curtailment, Enernoc's movement to software, etc. would need to net out 11% ahead of today. Of course the valuation isn't that simple, but I guess it's a start.
One of the big unknowns to me is ENOC's sustainable competitive advantage. Do they have one, and also, infrastructure investments needed to continue expnding -- especially globally. This has always been their albatross in terms of earnings. But now, as they scale, the issue may be less relevant, paving the way for earnings to soar. I don't understand the dyamics of their P&L, if they're at the inflection point. But they could be, and that would be pretty amazing.
If they're not, and earnings and/or sales growth this year and next year are ho hum, then that 25X multiple will quickly seem unjustified, the bloom will be off the rose, and there could be a gap down.
Also, Motsam posted great stuff about DR global penetration through 2020. That's penetration, but the other factor in determining the size of Enernoc's business is its share. I don't understand the compettiive set - ENOC's ability to get and keep market share.
But then, also, there's potential to be acquired.
These are the offsetting things I can think of, what could make an impact, and how much.
I know for sure that when the earnings are announced, it will seem to clear - in hindsight, of course -- what should have been! Ain't that the way it always is --