February 16, 2010 / 7:22 PM / 8 years ago

UPDATE 1-EnerNOC shares fall on Deutsche's gloomy PJM sales view

BANGALORE, Feb 16 (Reuters) - Deutsche Bank initiated coverage of EnerNOC Inc ENOC.O with a “hold” rating, and warned that the energy efficiency company’s sales in a key demand-response market, the PJM, would likely taper down in 2011, sending its shares down 12 percent.

PJM, or the Pennsylvania, Jersey, Maryland Power Pool, which accounted for more than half of the company’s sales in 2009, coordinates the movement of wholesale electricity in more than 10 states in the United States.

EnerNOC shares, which have nearly quadrupled from a March 2009 year-low, fell as much as 12 percent on Tuesday. They were down $3.42 at $30.35 in afternoon trade and were among the top percentage losers Tuesday on Nasdaq.

“We believe EnerNOC’s sales into the PJM market for demand response will likely peak in 2010 and decline in 2011 and 2012,” analyst Carter Shoop said.

However, Raymond James analyst Pavel Molchanov said while PJM, the biggest component of EnerNOC’s revenue in 2009, could be down by 2011, over time, more of the growth would come from its newer geographic markets, including Canada and Europe.

“Even if PJM happens to be down, the company can still sustain growth in capacity under management and revenue in 2011,” the analyst said by phone.

Boston-based EnerNOC is a “demand-response” company that pays customers to reduce energy consumption during peak hours when utility supplies are stretched.

The company, in turn, gets paid from utilities for managing a certain amount of capacity on its network and lowering the load on the electrical system.

Deutsche Bank’s Shoop said while EnerNOC was likely to aggressively reinvest in demand response and adjacent opportunities, these investments might take longer and cost more to develop than currently discounted by the market.

The analyst set a price target of $26 on the company’s stock, 23 percent below its Friday’s close.

On Thursday, the company had reported a wider quarterly loss but its outlook for 2010 topped Wall Street estimates. [ID:nN11229574] (Reporting by Adveith Nair; Editing by Gopakumar Warrier)

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