We bought 5,000 shares of Orion Energy Systems (NASDAQ:OESX) at $2.70 on June 7 of this year for the SHU portfolio, and the shares had quite an eventful day in reaction of Q1 2020 figures published before the markets opened:
First, the shares rallied strongly on the revenue and EPS beat, but then, doubts sunk in, and the shares tanked in a really exaggerated manner, we have to say.
We think the markets were spooked a little when management guided H2 as coming in somewhat weaker than H1, and there is also no guarantee that the big nation-wide mega contract on which much of the recent boom depends will have a successor that's anywhere near as good.
We would argue that even if that doesn't happen, that doesn't necessarily make the company a bad investment because we think the company has a lot going for it:
- The switch to energy-saving LED light is only in the early innings.
- The company's integrated approach is a competitive differentiator.
The latter was described by management on the Q1CC:
Our turnkey LED lighting and controls retrofit solutions begin with site assessments and initial energy audits at the facilities of our customers to accurately assess their existing lighting in their future needs for lighting and controls. From there, we work with our customers to determine solutions based on their particular needs and requirements. Our R&D team is able to develop and rapidly prototype customized LED lighting fixtures, specifically designed for the customer, along with customer-specific recommendations for third-party control systems, which we integrate into the full lighting solution. We also conduct a comprehensive utility rebate analysis on a location-by-location basis, and source possible project financing options the customer can explore.
Once the system requirements are established, we manufacture our state-of-the-art high efficiency LED fixtures in
