GRoDT schedules, Clearway 4Q20 results and more ?3

16:22 02-Mar-21

That didn't take long... even before the market closed Clearway reported that its 10-year bonds have priced at 3.75% thereby showing that enthusiasm for renewables continues unabated.

The same goes for GRoDT stocks, with EMAN getting a 10% bump just for a patent award, and a supply channel for a driver board.  The stock has almost quintupled since the last earnings report in mid-November, without any justification, as far as I'm concerned. 

Cue my standard explanation about patent awards not meaning much unless they hold up in court, which is exactly what happened for a patent troll in its case against Intel.  The damages are about half of last quarter's profit, but Intel will appeal and/or settle.  Western economies will continue to be at a disadvantage until they come around to the idea that their intellectual property ideas are broken.

I promise not to update this particular note again.

Virtu Financial has scheduled its first quarter report for the morning of May 4th.  Average analyst estimates project $1.03 of EPS from $444M of revenue, declining to $360M in the second quarter.  I think analysts are looking at the VIX, which apart from a spike at the end of January, has been relatively calm YtD in the low twenties, compared to a year ago.  However, the VIX is still well above pre-pandemic levels, and I reiterate that it is a poor substitute for market volume, which I see as somewhat elevated YtD.  Thus, while there will be some reduction in the retail trade as economies reopen, I think analysts are failing to model structural changes in the market well for the longer term.  Even if they are right and I am wrong, though, their guess for $2.65 of FY22 EPS means that VIRT should appreciate to $39.75 in under 2 years with a 15 P/E, and have a fair value of $32.20 now with 10% annualized forward discount.  That makes the current price point below $27 about 20% undervalued.

This is why I suggested that VIRT may be more attractive than CWEN(A) below, but Clearway has just offered $925M of green bonds to refinance existing debt and fund its new projects.  Assuming it gets good rates at or below 4%, I think it remains a buy-the-dips opportunity below $28 for long-term investors who are solely concerned with safe income.  Those who can better tolerate risk can still get better short term yield and opportunity with PPL, as AES makes another service move.

Finally, I'll note that Vuzix is using and unspecified portion of the cash it got by diluting shareholders to finance private customers.  Shares popped above $25 before falling back, and the rebate rate is now below 7%.

On 3/1/21 9:11 PM, Esekla wrote:

There is a lot of info here that I may want to refer to later, but if you're looking for market moving news, then feel free to skip this rather long note...

Three GRoDT stocks all scheduled earnings for March 15th today, and the associated estimates are summarized in the table to the right.

Time	Stock	EPS, Revenue -> Guide
morning	RESN	-0.10, $600 -> 700K
evening	WPRT	0.00, $69.3 -> 72.6M
evening	VUZI	-0.11, $4.0 -> 4.5M

I'll cover all of them at least briefly, though mostly for entertainment value in the case of Vuzix.  At least the increased share count will help keep the loss per share down, but the rebate rate is now below 8%.
 
Resonant is the closest to an interesting price point for me, after recent declines, an still not attractive above $5.  Details on Murata milestone progress will be of most importance in the wake of the preliminary results, but I'm not expecting great news.  Akoustis has the apparent lead in WiFi filters, but the handset market is ultimately more valuable and probably better suited to Resonant's XBAR technology. 

Westport's headline numbers will be much more important, along with ATM usage.  A hydrogen engine white paper has helped stem the 20% drop in stock price., but it doesn't stop me from thinking that the company will need to show traction far beyond anything we've seen so far to justify even a high single-digit stock price.  Don't be surprised if we have to wait until May to see much sign of that from China.

I will be surprised if we've fully determined the fallout from the Texas grid calamity by then either.  Clearway Energy had no estimated costs for winter-proofing its wind farms there when it announced its fourth quarter results this morning:

• a loss of 36 cents per share missed by $1.01
• from $200M of revenue, which missed by $86M

The turbines were rated for the cold, but using different lubricants is the only step I could see the company taking voluntarily.  Blade coatings and heaters would probably have to be forced by a mandate from the state, hopefully with support, given that the company is generally unwilling to even retrofit facilities with battery storage due to down time and PPA terms.  The failures were short, but they still contributed to Clearway having to hold its FY21 CaFD guidance steady at $325M, instead of increasing it.  That means the dividend should escalate to 36 cents per share over the course of this year.  Next year it should push to 39 cents with the Mount Storm wind project in West Virginia in 1H21 and another 35% of Agua Caliente being added to the partnership
that was formalized in December.

Despite the outlook, I've refrained from partaking of the dip in CWEN(A).  Failure in Texas is due to loose policy resulting in neglected infrastructure and that includes natural gas, yet I've mostly seen denial and exodus instead of planning so far.  Even without Texas, this year was set to be pivotal for Clearway, though.  Negotiations are beginning to renew many of its gas generation contracts, and management warned that it is expecting, 5-10 year PPAs rather than the longer ones that it is accustomed to.  I'll want to see how those work out, in addition to the actual costs and plans for Texas.  One of the reasons I've chosen Clearway and not competitors is the financing quality, but I'm concerned that a higher prices management will be increasingly tempted to use the ATM.  For the record, it has 201.636M Class A, B, C & D shares outstanding, with 198.82M issued at year end.  There are 3b authorized.  If things got tough and shares reverted to their 6% yield then even next year's dividend would mean $26 per share, even without a forward discount.

There are other investments with better yield, including Lumen, which got an edge win with IBM today.  Even VIRT is somewhat competitive on yield and arguably better growth.  Its press release today had showed almost all the value in Europe, but an AES Director jumping to Exxon is the latest point showing ESG penetrating the furthest corners of global equities.  It also really makes me think again about theories on some sort of deal with BGC, despite management's pronouncements to the contrary.  For the record, BGC's 10-K filing indicates that the theft of U.K. tax payments occurred from 2018 to 2020 and totaled $35.2M, which I see as having no impact.  What's more interesting and maybe also positive for VIRT is a DTCC proposal to implement 1 day trade settlement (T+1) possibly using a blockchain prototype that should be completed this quarter.  Transitions favor the technologically competeten, but even if everything went as planned this wouldn't see real market use until 2023.  Furthermore, although it could reduce collateral, it wouldn't really solve any of the counterparty issues.  Texas isn't the only system mired in the past.