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Renewable energy has been the talk of the town for over a decade now. Analysts and policymakers around the world have reiterated multiple times that fossil fuels are on their way out but the recent run-up in crude oil prices belies that belief.
Fuel Cell Energy (NASDAQ: FCEL) makes hydrogen power plants, and its customers include utility companies, municipalities, universities, hospitals, government entities/military bases, and a variety of industrial and commercial enterprises. The company’s major markets are the United States and South Korea.
However, it is a fact that Fuel Cell is a renewable energy company that has been part of the sector that hasn’t seen a run-up in its stock price even as stock markets have hit record highs. Its stock has fallen by almost 20% in 2021. Comparatively, the S&P 500 index has gained 27% in the first 11 months of the current year.
The stock surged in January and February this year, hitting $26 levels but has since then come down to earth with a thud and closed trading at $8.94 on November 26.
Has FCEL stock bottomed out?
There are two views to FCEL stock. Shares have been stuck at the same levels since July this year. Should the last four months be seen as a period of consolidation for the stock? Will Fuel Cell finally break out in the last month of 2021?
In September, the company reported its results for the third quarter of 2021, ending July 31. The numbers were solid compared to the third quarter of 2020. Revenues came in at $26.8 million compared to $18.7 million. The company reported a gross profit of $1.1 million compared to a gross loss of $3.1 million in the corresponding period in 2020.
Fuel Cell has cash and cash equivalents of $468.6 million as of July 31, 2021, compared to $149.9 million as of October 31, 2020. However, its backlog fell a smidge and stood at $1.3 billion on July 31, 2021, compared to $1.33 billion on July 31, 2020.
When you take into account the fact that the company reported around $71 million in revenues for the whole of 2020 and around $61 million in revenue for 2019, the $26.7 million figure is a clear sign that the company has picked up pace in 2021.
During the earnings call, Jason Few, President and CEO, Fuel Cell Energy said, “[The company] is working toward the goal of achieving an annualized manufacturing production rate of 45 megawatts at our Torrington facility by the end of the calendar year, up from 17 megawatts at the end of fiscal 2020.”
Why has Fuel Cell stock underperformed the S&P 500?
A major reason for FCEL stock’s underperformance is because the market views the company as a speculative investment. A quick Google search on fuel cells will throw up a lot of information on electric cars. Even though fuel cells are used in electric cars, Fuel Cell Energy has nothing to do with them.
Fuel Cell Energy works with utilities, and its biggest concern is how to keep the lights on without polluting the environment. As hydrogen fuel becomes more common, Fuel Cell Energy’s stock price should start moving higher.
A stock like Fuel Cell tests the patience of investors. If you believe in the story of green energy, then Fuel Cell is a stock to hold. If you are someone who needs to see a return in the short term, it would do advisable to move on.
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