This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Smart Grid Stock Keys: Washout Doesn't Mean Breakout

Stocks in this article: ELON ITRI ELT

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Previous year private rounds of financing valued Silver Springs at much higher multiples -- as much as $3 billion -- than current sector sentiment would support. With the sector trading at less than 10 times earnings now, it comes down to what investors are willing to pay for the smart grid space.

Sean Hannan, analyst at Needham & Co., said the general IPO market and general market issues don't help, but "caution with smart grid offerings" is part of the Silver Springs IPO issue. He said Silver Springs is trying to position itself as a wireless networking technology story, but at core it's a smart grid solution provider.

"Investors have seen smart grid decimated and anything tying Silver Springs to the utility space is slower speed. It isn't front end of the tech curve and they want to be associated with true tech thought leaders."

4. There's a takeout premium in all of these stocks not being realized.

Last year, Toshiba bought European-based Landis+Gyr and Schneider Electric bought Telvent, both deals struck at roughly 10 times multiples. So where is the takeout premium of at least 10 times for the rest of the stocks in the sector like Itron and Elster?

Schuman says there is strategic value in these names given the other global conglomerates among the "usual suspects" bidding for Telvent and Landis. The likes of Siemens, GE (GE) and ABB (ABB) are always rumored to be sniffing around in the smart grid space, and the smart grid pure plays left are trading at lower multiples than what Toshiba and Schneider paid.

That's one more reason why these stocks don't need to "shoot the lights" out in terms of new market growth to see an incremental multiple expansion.

5. Better to be an industrial than a pure play in smart grid?

The takeout argument brings up one last important point about the danger of pure plays in alternative energy .

Toshiba announced on Monday morning that it expects $12 billion global smart grid sales by fiscal 2015, with $1.8 billion in sales to be generated in the U.S. That's a long-term time horizon that makes sense for a conglomerate that has a balance sheet on which the smart grid "lumpy" revenue is a blip in any given year, and it may support an acquisition at these levels.

It also shows that any near-term opportunity in these smart grid stocks -- with the North American market coming off its stimulus cycle, European economics to support energy policy a wild card, and the emerging market profit equation still a work in progress -- isn't the type of bet that a Toshiba has to make in buying into the sector.

"Saying the smart grid stocks are 'washed out' can only be done in terms of talk about the long-term," said Hannan.

-- Written by Eric Rosenbaum from New York.


To contact the writer of this article, click here: Eric Rosenbaum.

>To follow the writer on Twitter, go to Eric Rosenbaum.

Follow TheStreet on Twitter and become a fan on Facebook.

3 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs