4 Reasons Why Orion Energy is a Good Short Candidate

Orion Energy (OESX) may be headed for trouble in the near-term. Here are a few reasons why I think this is a short candidate:

1) The company's IPO lockup expires this week. A very large percentage of the company's float will now become available. Given how this stock has performed since the IPO (not well) and how it has become the center of a class-action lawsuit, I suspect those who are now capable of dumping their shares will do so.

2) The company recently held a conference call with the Street to discuss their quarterly earnings. On that call, they uttered the "telltale phrase" that shorts like to hear which was something to the effect of: "we are reiterating our full year revenue projections, but believe that the year will be more back-end loaded than normal." For a company that has very little visibility into their quarterly sales, this is a very 'iffy' phrase. How would someone that has very little visibility into their quarterly numbers have strong visibility into their yearly revenues? I wonder if they aren't trying to hold up the stock price into their lockup? Seems to me that a "growth company" like this, which is awarded a multiple similar to those in the alternative energy space should grow, right? Well, if I run the figures based on their guidance, this company will not have grown for 4 quarters in a row. Seems like its multiple sould come down to me....not to mention that the "E" in the "P/E" equation might be too high? Is the next step for this company to take down revenue projections for the full year?

3) The company makes a light fixture that helps comapnies reduce their electric bill. It's currently awarded an energy efficiency multiple - a kin to companies like ENOC, COMV, etc. However, this company has neither recurring revnue (like these companies) nor substantial patents to which an investor should feel comfortable ascribing value. Several companies - some are public and some are not - make nearly identical fixtures....seems hard to believe that such "value" would exist when the part is essentially a commodity.

4) Lack of reliability: in the company's first public quarter, they beat the numbers, yet guided down for the following quarter because they were "allocating their sales resources to their phase 2 and phase 3 products." Phase 2 and Phase 3 are their "lightpipe" and their electronic controls products. When an investor questioned them on the call about how they'd done in the most recent quarter, they neglected to give a solid answer and indicated that the light pipe would likely be a meaningful revenue contributor in 2010. Hmmm....if that's true, then why did they guide down their first quarter 'out of the box'?

Disclosure: This author is short the stock and wonders if this week the company won't see material selling....

 

Comments

[DALE 10,1:]

I WONDER ABOUT THE THE ETHICS INVOLVED IN THE ABOVE SITUATION WHEN THE ANALIST IS FORECASTING A SHORT IN A STOCK THAT HE HOLDS A SHORT POSITION IN! CURIOSITY!

2008 Jun 16 11:04 AM

[LoveShorting:]

Peter: What? Ivanka is 100% ethical - - she disclosed her position! Are
you perhaps new to this investing thing ?

Ivanka: Thanks for doing the hard work. My username suggests what I may do with your info....

2008 Jun 17 09:04 AM

[wolfdog:]

You have correctly focused on 3 items that a lot of investors fail to sufficiently appreciate: back end loaded guidance, supply/demand for the stock, and vague comments about product ramps

2008 Jun 18 05:35 PM

[Bob the Bear:]

Everything you say is probably true. However, what you say is no secret. I say this because the stock is down already. I would think this is the place where shorts will cover.
I love the bear side, but I don't want to be the last one to short. Perhaps you want to cover, is that why you wrote this piece?

2008 Jun 21 07:40 PM

[Open Your E...:]

Ladies and Gentlemen, Orion is a LIGHT FIXTURE manufacturer nothing more. NOTHING MORE! This is a quote from their own prospectus "Orion Energy Systems, Inc. designs, manufactures, and implements energy management systems, which consists primarily of energy efficient lighting systems, controls, and related services."

All the hype in the world does not change that. "Energy Play" my backside.....they build a commodity item that is carried, distributed and sold MUCH more effectively by literally scores of other companies.

Sure, the light saves money. So does every other Fluoroescent HIghBay on the market. Google the term "Fluorescent High Bay" and see for yourselves. But, does that deserve a P/E of 50 plus? No, look at the others in the market that are large, entrenched, established and much more diversified; such as Acuity brands AYI, cooper CBE, and many others and see where they are PE wise.
AYI and CBE, $2 billion and $7 billion in revenue with stronger earnings have an average PE of 12... and bothe have much better operating margins.

So, this is a $3 to $4 stock TOPS! And, that is where it is headed folks...sooner rather than later.

Also, I own none of the stock, never have and never will...for those that watch that sort of thing. You want an industrial play try UTX.

2008 Jun 26 11:18 AM

[SHAM FINDER:]

The company is a flourescent light fixture seller. This sounds high tech to me. They live off energy rebates given to their customers by the Utilities for the energy that any like-in-kind fixture (made by anyone) yields. Take away the rebates and the company's revenues drop by 33%. The inflated marging they achieve due to the rebates.

Bob the bear better sell now while it is still not a penny stock.

2008 Sep 10 08:53 PM

[Bob the Bear:]

Hey Sham, you still alive? I bought OESX at an average cost of about $2.96. You were right about the short at $4.25 but it was too cheap for me and it just went down with the market(Sept-Nov). I spoke to a local electrical contractor who had been out there, in Wisconsin. He loved the company and their products. Pepsi, Bud, Coke, etc love them too. Someone has given you some bad info. Happy New Year and good luck to you.

Jan 18 01:25 PM

[Bob the Bear:]

Sham I meant $9.25. Excellent short at the time! I hope that you profited handsomely.

Jan 18 01:31 PM