Roth Trims PT on Orion Energy Systems (OESX) to $6; LED Hiccup Doesn't Disrupt Story

Roth Capital maintains its Buy rating on Orion Energy Systems, Inc. (AMEX: OESX), but trimes its price target from $8 to $6 followng Q1 results reported Monday night.

Analyst Philip Shen said, The primary driver of the weak FQ4 results, and the main focus on the call, was the protracted sales cycle in LED lighting as customers weigh several retrofit options. LED is still ramping, and its value proposition is still not well understood by end users. As a result, customers are requesting multiple quotations from lighting suppliers for both LED and fluorescent technology. Given the “noise” in the marketplace surrounding the costs and benefits of competing lighting technologies, management believes a number of customers are taking their time when deciding on large scale retrofits.

Despite the difficult FQ4, we are encouraged by commentary on OESX’s pipeline and the potential strong underlying growth in lighting. Management cited a strong pipeline, especially in LED, with significant advancements in both total dollars and size of projects. Several large national accounts could materially sway results in the coming quarters, including potential contracts with Ford and a large financial institution. We like OESX’s new LDR technology, which we believe significantly expands OESX’s addressable market into retail and commercial office space. Our FY’15 forecast includes $15.5mn in sales from the Harris LDR segment (+74% YoY), and we see organic growth in OESX’s lighting segment of 10% YoY ($63.6mn in FY’15), which we expect to be driven primarily by LED products. Anecdotal data points from the call were also encouraging, as management cited “one call closes” for smaller purchasers of its LDR office troffer technology, Shen noted.

For an analyst ratings summary and ratings history on Orion Energy Systems click here. For more ratings news on Orion Energy Systems click here.

Shares of Orion Energy Systems closed at $4.66 yesterday.

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