Hope today brought you some relief despite the VXX rise. After a tumultuous ride, I ended up closing my UNG position two weeks early. Still positive but left most of it on the table. Not sure it was worth the extra gray hairs!
I see it as an opportunity for DR, but not necessarily EnerNOC. On Point had a show earlier this year about solar ("search for Big Solar And Renewable Energy In The Age Of Fracking") that talked about homeowners leasing solar panels from companies like Solarcity. They are already looking at DR as a business opportunity (similar to Google with Nest, they have a relationship and infrastructure in the home). I don't think EnerNOC can or will compete in the retail market (was Comverse the company that tried and failed here?)
As supply grows and diversity grows, we will likely see lower prices ahead for DR. EnerNOC's management likely sees it too, which is why they've been so keen on diversifying recently. If people believed DR was a sustainable, defensible business, EnerNOC would have been bought out long ago.
Disclosure: long here for a trade.
Just clarifying, since I think I've got my details wrong. I would propose that yesterday's drop is the result of Credit Suisse, while today's drop is the result of the S-8. The new S-8 adds potentially 2 mil new shares, after adding 2.5 mil potential shares a year ago (of which only net 500K have gone into circulation). Does this become a yearly occurrence? Sure seems that way...
Looking closely, management granted themselves (and employees) 1.5 mil shares during 2013, and then voted to repurchase 1 mil shares. So essentially they transferred from company coffers into their own pockets, with shareholder approval.
That 1.5 mil shares represents over 5% of the value of the company. That's a lot of dilution for a company no longer a startup.
From Credit Suisse report issued yesterday:
"Following the court's decision to vacate FERC Order 745 on May 23 and FERC's ruling on rule changes in PJM on May 9, we lower our Target Price to $20 (from $23) reflecting 7x 2014 EBITDA. We believe a discounted multiple is warranted given the increased uncertainty and risks posed by both developments"
Also, refer to the results of the annual meeting announced yesterday. Interesting to read the "nay" votes against the compensation plan. Management is very well compensated with both cash and grants.
From the last 10Q:
Roughly $4 million per quarter in stock-based compensation expense.
500K new shares issued per year.
No new information between the PJM press release and the Credit Suisse report yesterday. Fundamentals? Yeah, whatever. Let's try technicals: A bit of support at 17 and then more support around 16.
Dilution is killing this company. Cash-flow positive and yet management is taking all the gains (and spending on acquisitions as they look for a new golden goose). We are entering a lower-growth area. Management should consider some sort of divi, but it ain't gonna happen.
similar growth rate
similar GAAP losses
similar "growth at any cost" management
similar "story stock" status
similarly misunderstood product and market
and now, finally: similar valuation
My point: FEYE would have been a good model going into Q1 results. They are completely different companies, and yet they are practically the same stock. Investors buy cash flows and growth rates, not products. Watch out for arbitrage opportunities like this going forward. Also, FEYE may point to a lower bound in terms of valuation.
Clearly, WDAY is an anointed company. Forward P/S over 20. Even Tableau, with revenue growth of 84% YoY and profitable, can only manage a P/S of 12 in this market. Granted, the addressable market of WDAY is much larger than DATA, but I don't see how WDAY can sustain this growth rate into the billions of $ in revenue. A more appropriate comparison: CRM, with $5+ billion in revenue, has a P/S around 6.
BTW, short at 20.68 today. Time will tell. I think this is a liquidity-driven rise. We know what happens to ENOC when liquidity dries up.
I don't have any insights, but I think it would depend on how Enernoc's contracts are structured. For example, if they are based on the amount of participation (say, a flat fee per customer or a flat fee per megawatt served), then the number of participants is down and revenue will be down. However, the total dollar value of DR is higher than last year. If Enernoc takes a percentage of total dollar value, then it looks like the results are better than last year. Confused? Yeah, me too.
Let's see what the market says on Tuesday. If anything, this removes some near-term uncertainty.
And of course, more regulatory uncertainty. From the PJM Press Release:
*PJM is evaluating a May 23 appeals court ruling vacating FERC Order 745 in its entirety. This ruling could affect how demand response resources are able to participate in PJM's markets in the future. Since the court has not issued a mandate requiring FERC to take action pending appeal of its ruling, there are no immediate impacts on the current base residual auction results.
For comparison's sake, here's the piece from the 2016-2017 results (last year):
Extended Summer DR and Annual Resources located in the RTO is $59.37/MW-day for all three capacity product types. The Resource Clearing Price for Limited DR, Extended Summer DR and Annual Resources located in the MAAC LDA is $119.13/MW-day for all three capacity product types. The Resource Clearing Price for Limited DR, Extended Summer DR and Annual Resources located in the PSEG LDA is $219.00/MW-day for all three capacity product types. The Resource Clearing Prices for Limited DR,
Extended Summer DR and Annual Resources located in the ATSI LDA are $94.45/MW-day, $114.23/MW-day and $114.23/MW-day, respectively.
Overall, supply is down, prices are up. Not so bad, right? Some excerpts:
A total of 10,975 MW of demand response was procured -- a decrease of about 1,433 MW from last year's auction. However, there was a significant shift to the types of demand resources that have more flexibility and a greater contribution to reliability. There were 1,401 MW more "annual" and 4,693 MW "extended summer" demand resources clearing in this auction than last year, while the amount of "summer-only" demand resources declined by 7,527MW since last year.
The total quantity of demand resources offered into the 2017/2018 BRA was 11,293.7 MW (UCAP), representing a decrease of 22.2% over the demand resources that offered into the 2016/2017 BRA. Of the 11,293.7 MW of total demand response that offered in this auction, 10,974.8
MW cleared and will be awarded capacity payments. The cleared demand response is 1,433.3 MW less than that which cleared in the 2016/2017
BRA representing an 11.6 % decrease. Of this change, 1,073.1 fewer MWs of DR cleared in the MAA C LDA and 360.2 fewer MWs of DR cleared outside of the MAAC LDA. Table 3A contains a comparison of the Demand Resources Offered and Cleared in 2016/2017 BRA & 2017/2018 BRA represented in UCAP.
The RCP for Limited DR, Extended Summer DR and Annual Resources located throughout the RTO except for the PSEG LDA and the PPL LDA is $106.02/MW-day, $120.00/MW-day and $120.00/MW-day, respectively. In the PSEG LDA, the RCP for Limited DR, Ex tended Summer DR and Annual Resources is $201.02/MW-day, $215.00/MW-day and $215.00/MW-day, respectively. In the PPL LDA, the RCP for Limited DR, Extended Summer DR and Annual Resources is $40.00/MW-day, $53.98/MW-day and $120/MW-day, respectively.
Not sure about the timing of the release. Here's a replay of last year's prices. (guessing it's after the close, although maybe there was a downgrade on Monday morning?)
Date Open Close
May-24-2013 17.69 17.84
May-28-2013 16.40 15.01
I too tried to sell today but only got filled on half my order. Hopefully tomorrow presents another opportunity.
Last year's PJM results were released on May 24, 2013. Guessing the decline has been people getting ahead of any poor results.