4 Reasons Why Orion Energy is a Good Short Candidate

| About: Orion Energy (OESX)

Orion Energy (NYSEMKT: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....