Lake Street Capital Markets Starts PowerSecure (POWR) at Buy, Sees 56% Upside

January 9, 2013 11:27 AM EST
Get Alerts POWR Hot Sheet
Price: $18.76 --0%

Rating Summary:
    6 Buy, 5 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Lake Street Capital Markets initiated coverage on PowerSecure (NASDAQ: POWR) with a Buy rating and $13 price target, suggesting 56% upside.

Analyst Robert Brown said the re-focused business is positioned for margin expansion and earnings growth.

"Over the past few years, management has shed non-core / low-growth businesses, diversified and expanded its offerings, and increased its recurring business to roughly 10% of revenue," Brown states. "We believe the company is now re-positioned in strong growth markets (LED lighting, distributed generation (DG), and utility infrastructure) with a good mix of recurring and project-based revenue. Further, we think its pipeline of grid infrastructure work is strong and its new LED lighting products have big step-change potential."

The analyst said the company's backlog of long-term recurring revenue reached $71 million in Q3-12 and now represents roughly 10% of annual revenue. Also that diversified across DG projects, large and small utility infrastructure projects, and LED lighting business. In 2008, one one customer represented 33% of revenue, he notes.

Brown also notes that multiple new LED lighting products were introduced in 2011 and 2012 including a street-light and a fluorescent tube replacement light. Each can become a $10+ million businesses, he said. The Utility Infrastructure (UI) is also making serious in rounds, including $9 million in new UI business for 2013 announced in December.

In addition to the long-term recurring revenue backlog of $71million, total backlog increased 17% to $175 million in Q3-12. Also the share buybacks show confidence cash flows and future growth.

For an analyst ratings summary and ratings history on PowerSecure click here. For more ratings news on PowerSecure click here.

Shares of PowerSecure closed at $8.35 yesterday.

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