Gaiam Won't Stay Off of Wall Street Radar for Long

Late last week, Gaiam Inc (GAIA), the everything "green" retailer announced plans to spinoff its Real Goods Solar unit (to trade under RSOL on the Nasdaq), which installs residential solar energy systems in California, and claims 2/3 of the residential solar market. If you're a big believer in the green movement like I am and believe it can provide outstanding returns to your portfolio over the next decade (like I do), then Gaiam (GAIA) is a company to watch and this spinoff may just give the stock an additional pop over the next few months. Yes, solar isn't as hot as it was last summer, but a correction was needed and solar is far from dead.

What I like most about Gaiam is that in addition to its investments in solar, it's a green retailer pure play and is well diversified. The company sells yoga supplies, wellness instructional media, exercise equipment, eco friendly home and outdoor supplies and is even building a growing community health conscious, green and spiritual individuals. You have to see this – they even offer a hooded fleece made out of recycled pop bottles.

Oh yeah, ..and the company is growing and growing quickly with earnings rising more than 40% last year and expected to rise another 50% in 2008. With just 2 analysts covering the company right now, GAIA remains relatively off of Wall Street radar, but not for long.

Comments

[Yogish:]

There is a very very large short interest in GAIA and I think they are going to have a problem. The knock on GAIA is that it is an "expensive" stock but I think this analysis is basically wrong. The significant short interest has been there for quite a while, at least since the stock was in the low teens. Now GAIA is taking public its solar operations which have a value of $5-10 per share.

The original short story was predicated on the fact that GAIA wasn't bring much from the to the bottom line. The real reason for this is that they are investing heavily for the future and also expensing everything. For example, when they set up a "store within a store" all the initial expenses are run through the income statement.

The company is also investing heavily in its subscription business. Recently, gross profits have been significantly better than guidance, but GAIA has not let the difference flow to the bottom line but has instead used it to increase investment. At some point soon, GAIA is going to sharply reduce investment and start harvesting and all of this is going to hit the bottom line.

The short interest is 3 million shares and the shares are fairly tightly held by some committed longs. I think this one could be interesting.

2008 Feb 12 11:10 AM

[A.S.D.:]

GAIA was a great buy early last year. I picked up some in the $12s. If you buy this at $25 or more, be ready to get out with the first big jump up, if it happens. Every dog has its day...ALY, FTK, TARR, GSOL, HW, BAA, GNK...they come and they go...and come again??

2008 Feb 12 11:56 AM

[alpha24seven:]

"which installs residential solar energy systems in California, and claims 2/3 of the residential solar market"

I don't believe this to be true. This should be clarified because that is a VERY big claim. I'm quite sure that these guys do no have 2/3 of California's residential solar market.

2008 Feb 12 03:21 PM

[Tate Dwinnell:]

Yes clarification is needed here.. Californina is 2/3 the solar market and RSOL happens to be a big player in California.

2008 Feb 18 12:49 AM