Daily Gains Letter

Silver Spring Smart Grid Stock an Investment Opportunity to Watch?

By for Daily Gains Letter |

Silver Spring Smart Grid StockOver the past few years, we have witnessed fewer loss of power situations on the electricity power grid. A big reason is that hydro operators are working proactively in monitoring the use of electricity on the residential and commercial power grids.

The adoption of devices at residences have helped hydro companies deal with the demands of a power grid and, in the process, lessen the chances of a grid meltdown.

Silver Spring: Smart Grid Hydro Developments an Attractive Investment?

A small-cap contrarian stock that piques my interest as a potential investment opportunity is Silver Spring Networks, Inc. (NASDAQ/SSNI), which has a share price of $9.93 and a market cap of $485 million. The stock has been a major underachiever, but it does offer a good example of a potential aggressive investment opportunity. Silver Spring debuted at $17.00 in March 2013 and traded at $33.00 in August 2013, prior to sliding to the current levels. Well off of its 52-week high of $18.40, the stock suggests a potential investment opportunity on price weakness.

Silver Spring Networks Chart

Chart courtesy of www.StockCharts.com

At the heart of the company’s business is its Internet-based “IPv6” networking platform and solutions, which allow hydro companies to monitor energy use at homes and businesses, thereby creating a “smart grid.” The company has about 23 million installed devices operating in the United States, Canada, Australia, New Zealand, South America, Asia, and Europe.

An interesting project in the works by the company is its “Streetlight Vision” solution to network streetlights. The solution allows a hydro operator to regulate the brightness of streetlights, as well as when the lights come on. The company’s venture with Florida Power & Light will include close to 500,000 streetlights in the state upon completion. Success could open up new markets across the country.

Silver Spring By the Numbers

After a revenue decline in 2014, the company is expected to ramp up revenues by 45.9% to $279.12 million this year, and 16.1% in 2016, based on Thomson Financial estimates.

Profits have been absent, but Silver Spring is estimated to continue to cut its losses to $0.03 per diluted share this year, followed by profits of $0.30 per diluted share in 2016.

On a quarterly basis, Silver Spring has beaten the Thomson Financial consensus earnings-per-share (EPS) estimate in three of the past four quarters.

The balance sheet has minimal debt of $1.16 million and cash of $120.80 million, or $2.47 per diluted share.

Silver Spring could also attract short-covering support, as there were 3.3 million shorted shares, or 11.9% of the float, as of January 30. A rally in the stock could drive buying and produce an investment opportunity.

While the company should be viewed as an example of an aggressive contrarian situation, there is hope of an investment opportunity if the company can deliver.

Note that this is not to be construed as advice to buy, but rather as an illustration of the kind of company that may deserve a second look from investors.

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