As an estimated 50 million people in the Northeast, Midwest and Canada sat in the dark as a result of the Aug. 14 blackout, American Power Conversion Corp.’s stock price was lighting up.
Buoyed by investors’ snap conclusion that the country’s largest-ever power outage would boost demand for APC’s power-backup systems, the West Kingston company’s share price soared more than 15 percent in the days following the blackout, to a 52-week high of $18.75 on Aug. 19.
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APC makes products for homes, small offices and corporate data centers that protect computer systems from a loss of data or hardware damage stemming from power interruptions. Its uninterruptible power supply (UPS) products keep systems running long enough to shut them down properly.
But will fallout from the blackout really mean bigger sales for APC?
“We believe American Power Conversion can and probably will monetarily benefit from this blackout,” said Eric Prouty, an energy technology analyst who covers APC for Adams, Harkness & Hill in Boston. He has a “market-perform” rating on APC’s stock.
Prouty said the blackout should serve as a wakeup call for businesses or individuals who don’t have up-to-date backup systems. He said APC’s sales typically get a boost during summer months anyway, because lightning strikes often cause outages that can disrupt computer networks, sparking demand for protective products. The blackout should only magnify that seasonal boost, Prouty said.
Still, with more than $1.3 billion in sales last year, it will take a healthy surge in demand to make a noticeable difference on APC’s top line.
“Will the blackout double (APC’s) business? No,” Prouty said. “Will they see a bit of an incremental bump? You bet.”
Debbie Hancock, director of investor relations for APC, says it is “very difficult to quantify, from a revenue standpoint, the impact of an event like this.”
Even so, Hancock said APC tends to see a few typical responses from customers after a substantial power disruption.
One is a “knee-jerk” reaction from consumers and small businesses that did not have power-outage protection systems and want to protect themselves. Also, companies are more likely to reassess their power-backup infrastructure, to assure that critical information systems are protected.
And Hancock said such a large blackout likely will serve to broaden public awareness of the reality that no power system is perfect.
“It’s a reminder that even in the U.S., where we have a very complex and sophisticated utility system, it’s still vulnerable,” she said.
Chris Sessing, an analyst who covers APC for Crowell Weedon & Co., a stock brokerage in Los Angeles, said the blackout and subsequent media coverage was, if nothing else, a good plug for APC.
“We view it as sort of a large advertisement for their products,” said Sessing, who has a “buy” recommendation on the stock. “But we don’t expect a significant, quantifiable increase in revenues stemming from this.”
Sessing points to the blackouts in California during the state’s energy crisis in 2000 – another highly publicized event that spotlighted the need for backup systems. But during that time, APC was not able to measure a discernable increase in sales, Sessing said.
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