The stock price of FuelCell Energy (NASDAQ: FCEL), a company that designs, manufactures, and operates fuel cell power plants that work on natural gas or biogas, has seen its stock rally by about 41% over the last five trading days, although it remains down by about -31% over the last month (21 trading days). In comparison, the S&P 500 is up about 3% over the last week. Although there weren’t too many specific developments relating to the company over the last week, investors likely bought into the stock following the recent correction and also due to anticipation surrounding its quarterly earnings which are due shortly. More broadly, renewable energy stocks have been in favor with investors, driven by expectations of a favorable regulatory environment, with Democrats holding control of both the White House, the House of Representatives, and the Senate. So will FuelCell Energy stock fall following these solid gains or is it likely to rally further? FCEL stock has a 53% chance of a decline over the next month after rising by about 41% over the last five trading days, per our Machine Learning Engine, which analyzes five years of stock price data. See our dashboard analysis FuelCell Energy Stock Chances Of Rise
Now is FuelCell Energy stock a buy for the long-term? We don’t think so. Although fuel cells are more reliable compared to wind and solar energy sources, while offering a lower carbon footprint compared to other traditional fossil fuel-based generators, FuelCell energy doesn’t look like a compelling bet on the space. The company has been around for decades and hasn’t reported a profit or generated free cash flow for over 20 years. The company’s products, although apparently more economical compared to rivals, are bulkier and less flexible and uptake has been weak in recent years. Revenues have declined steadily from $108 million in 2016 to $71 million in 2020, due to falling product sales although this has been compensated to an extent by legacy power generation contracts. Now, although the recent rally has enabled the company to issue new stock and recapitalize its balance sheet, reducing some risk for shareholders, there are cheaper ways to play the fuel cell market. For instance, rival Bloom Energy
[1/6/2021] Pick Bloom Over FuelCell
The stocks of hydrogen and fuel cell makers fared well last year, driven by increasing interest in clean energy, the recent extension of tax credits for fuel cell projects, and the election of Democrat Joe Biden to the U.S. presidency – who has proposed to spend as much as $2 trillion on fighting climate change. Bloom Energy and FuelCell Energy (NASDAQ
Bloom Energy sells solid oxide fuel cell generators called Bloom Energy Servers
Bloom’s Revenues have expanded from around $366 million in 2017 to about $758 million over the last 12 months, driven by growing installations of its servers. For instance, with power outages and wildfires in recent years in California, companies started to work with Bloom’s products. FuelCell, on the other hand, has seen its revenue decline from around $96 million to $65 million over the same period, as its product revenues collapsed although it continues to earn revenue from some legacy power generation contracts as well as service and licensing Revenue. Bloom has also reduced its losses, with Operating Margins improving from about -46% to about -17.5% between 2017 and the last 12 months. FuelCell on the other hand has seen its margins deteriorate from -47% to about -85% in the same period.
Now let’s look at the relative valuation of the two companies. FuelCell Energy trades at a much higher price to sales multiple of 40x, compared to about 5x for Bloom. This doesn’t make sense, considering that both companies operating in the same industry with Bloom apparently working with superior technology. Moreover, Bloom has more than doubled its Revenue since 2017, while FuelCell has seen sales decline by about one-third over the same period. Considering this, we think that Bloom Energy is currently the better pick of the two stocks.
[12/11/2020] Stocks To Play The Hydrogen Economy
Interest in clean energy stocks has soared this year, driven by low-interest rates, improving economics, and the election of Democrat Joe Biden – who has proposed to spend as much as $2 trillion on fighting climate change – to the U.S. presidency. While solar and electric vehicle stocks have been the most high profile winners, another theme that appears to have caught investors’ interest is the concept of the “hydrogen economy” or the use of hydrogen as a fuel for transportation and other energy requirements, replacing fossil fuels.
Hydrogen burns much cleaner than petroleum-based fuels and can be produced using just water and energy or from hydrogen-rich gases such as methane. Hydrogen is also seen as a means of storing excess renewable electricity – as the electricity can be used to run a process of electrolysis, which converts water into hydrogen. Our theme of Hydrogen Economy Stocks includes the stocks of U.S. based companies that sell fuel cells, renewable energy equipment, and supply hydrogen gas. Below is a bit more about the companies in our theme and how they fit into the broader picture of the Hydrogen Economy.
Bloom Energy sells solid oxide fuel cell generators called Bloom Energy Servers that use natural gas or biogas as fuel via an electrochemical process without combustion. The company also develops hydrogen fuel cells – that use only hydrogen gas as fuel. The stock is up 245% year-to-date.
FuelCell Energy (NASDAQ: FCEL) is a company that designs and manufactures carbonate and solid oxide fuel cells that run on hydrogen-rich fuels such as natural gas and biogas. The company also operates over 50 fuel cell power plants across the world. The stock is up 229% year-to-date.
Air Products and Chemicals (NYSE: APD
Cummins (NYSE: CMI) – an industrials company best known for its engines and power generation products – has been working on hydrogen-based technologies for almost two decades. The company acquired Hydrogenics, a leading Canadian hydrogen fuel cell player last year. The stock is up 23% year-to-date.
While FuelCell stock may have rallied big, 2020 has also created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for PNM Resources vs. Atlas Air Worldwide Holdings shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.