Utility services provider EnerNOC (NASDAQ:ENOC)
has always been a more challenging story than average, but the
company's operating environment has become considerably more uncertain
since I last wrote about the company.
In a nutshell, the risks that regulatory changes would change/challenge
the company's core business have come home to roost in a big way, and
there is little-to-no certainty now regarding how the demand response
market will look in a year or two.
While the source of almost 50%
of EnerNOC's revenue spasms, management is pivoting the company toward
its software-as-a-service (or SaaS) business and the opportunity to help
enterprises and utilities better track, plan, and control energy
consumption and spending. Here too, though, there are ample
uncertainties as most SaaS businesses have yet to establish a consistent
level of GAAP profitability, making comparisons and projections for
EnerNOC more challenging.
Modeling and risk-weighting various
scenarios leads me to believe that ENOC shares are undervalued, with a
fair value in the mid-teens. That assumes, though, that the demand
response business is still viable on a long-term basis and that the SaaS
business can deliver strong growth. The bull-case and bear-case
boundaries are much wider than normal, though, and it is hard for me to
argue that the potential here is worth the uncertainty and risk.
Follow this link for more:
EnerNOC Hard To Value And Facing Major Regulatory Unknowns
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