FuelCell Energy – the moment you reach the growth ceiling

How quickly things can change. Just a few months ago, FuelCell Energy [Nasdaq: FCEL] risked bankruptcy due to questionable financial practices. With the help of a highly committed and successful consulting firm, the business then righted the ship. At one point, its price soared from around USD 0.13 to an intraday high of over USD 4.00 as it saw its market cap jump from USD 40 million to USD 500 million. The latest stock crash then put an end to it all and the stock took a nosedive, finishing below USD 1.00. It will certainly take some time before the price averages out to reflect business growth.

Daily trading volumes of up to 150 million shares let me assume FuelCell stock is of great value to gamblers and day traders but is less of an opportunity for those who think strategically. Still, I believe things will change for the better in the not-so-distant future, when institutional investors take over the reins and put money into the company long term. Big corporations could also see a business such as this one as an attractive acquisition target. Such was the case for Hydrogenics, the Canadian fuel cell manufacturer that was bought by Cummins.

HOW

FuelCell’s new board must now leap into action, focus on fulfilling existing orders, generate new bookings and acquire new customers and, above all, make the manufacturer profitable. The company does frequently report that it is making progress, for example, in constructing a fuel cell power plant for Toyota in California to produce hydrogen for FCEVs, among other things. Also, if the joint venture with E.ON Energy Solutions is to make any sense, it needs to attract some large orders from Europe soon.

Favorable outlook

Good reasons for expecting an uptrend to return are the results for the first quarter ended Jan. 31, 2020. During the first three months of 2020, revenue totaled USD 16.1 million. Operating expenses decreased by 51 percent year over year, whereas loss from operations was USD 3.1 million, compared to USD 15.2 million in the prior-year quarter. The net loss per share was USD 0.20, though you will need to bear in mind that the calculation includes warrants issued at the same time capital was raised.

read more in H2-international May 2020

Risk warning
Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small- and mid-cap businesses, which means their stocks may experience high volatility. The information in this article is based on publicly available sources, and the views and opinions expressed herein are those of the author only. They are not to be taken as a suggestion of what stocks to buy or sell and come without any explicit or implicit guarantee or warranty. The author focuses on mid-term and long-term prospects, not short-term gains, and may own shares in the company or the companies being analyzed.

Author: Sven Jösting, March 19th, 2020

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