Stock Juice

Short Squeeze possible?

2008-11-07T06:41:00.000-08:00

Enernoc will report earnings next week. If it represents the 'inflection point' quarter that we suspect, things could get interesting because the short interest is reported to be 17% of Float.

What would happen if : the quarter's results illuminate the underlying business model and the open questions are answered (see below). What if the market 'gets it' that the company was investing for the opportunity they could clearly see in their internal annuity value spreadsheets -- not being the spenaholics they have been accused of. What if renewal revenue run rates provide a lot of confidence that the company will exit 2009 profitable for the year with revenues nearing a 200M run rate?

The recent relative strength of the stock might indicate that the shorts are getting nervous....

While we have no specific information, we do know that this will be the first full quarter of PJM revenues, and we know what PJM revenues/MW yeild (53K per MW/Yr) for the Emergency Program, added by Spinning Reserve revenues and other bennies. We know that COMV has created some confusion in the market about PJM revenues (their model seems to have been based on the old PJM plan). So the fact that the market might be confused is understandable.

Clarity should come next week. There are other risks to this developing company that could come into play, but we still think that Q3 will the inflection point and with each successive quarter the risks to the company decline.

This company could be in that sweet spot when growth companies put start hitting their stride. Don't give your stock to the shorts if the stock spikes, let this one run through this business cycle.

Illuminating the underlying Demand Response business model.

2008-10-27T05:34:00.001-07:00

Enernoc (ENOC) will announce third quarter results in early November.

This should be the 'inflection point' quarter for the company. Enernoc increased their investment (and expense line) to grab share as they saw the demand response market really develop. They knew that barriers to entry were not that high, so they wanted to create barriers to success for their competition by building brand and market position.

The third quarter will have three months of PJM revenues in it. PJM has some of the 'juciest' demand response revenues right now, however there is a significant time lag between when you invest in sales/marketing and when the revenues flow. Q3 is the catchup quarter and will allow people to more accurately model forward seasonality and revenue.

Furthermore, ENOC has placed a few strategic bets for 'beyond demand response'. The DR market will penetrate relatively quickly (ie within a decade). However the customer relationships will allow for the continous flow of new energy cost efficiency and environmental offerings such as procurement, and cap-and-trade management.

But back to Q3. It should demonstrate that:

a) the company has more than enough cash on hand to execute on their vision

b) the company will generate cash from operations for the second half of this year

c) the company continues to distance itself from its competitors

d) the company has a very realistic chance of being profitable for the full year 2009

e) the company is not a 'spend at all costs' risk -- true it has made some youthfully bold bets with over 170Million invested to date, but the #1 market position in DR with a strategic foothold in the larger industrial/commercial energy management market will prove to be worth it.

Not sure how the stock will react in these markets, but investors should be heartened by the results.

Best Speculative Idea

2008-05-07T05:05:00.001-07:00

We like Enernoc as our best highly speculative idea right now.

The company has been investing heavily, and Wall Street got freeked by the expense growth. Yet the renewal revenue model, and the "net present value of a new customer" justify this investment level.

Acquistions layered over hyper growth create real execution risk. Still we think the market is new, the competitors are struggling to keep up and ENOC has the momentum.

Read our blog dedicated to demand response and ENOC at
http://wwwenocjuice.blogspot.com/