FuelCell Energy, Inc. (FCEL) is an alternate energy pioneer that designs, manufactures, installs, operates, and services stationary fuel cell power plants for distributed power generation. The company offers a SureSource product line based on carbonate fuel cell technology, including distributed hydrogen, micro-grid, and multi-megawatt applications. The company primarily operates in the United States, South Korea, England, and Germany under four segments – Product, Service and License, Generation, and Advance Technologies.
FCEL is one of the oldest baseload power solutions providers steadily progressing towards enabling a world empowered by clean energy. In its third fiscal quarter ended July 2020, the revenue of $18.7 million declined 18% year-over-year, primarily reflecting a decrease in Service and License revenues and Generation revenues. Operating expenses decreased 16% year-over-year to $7.6 million. However, net loss for the quarter widened to $15.3 million from the year-ago loss of $5.3 million.
Despite improvements in the science behind the alternative energy and emissions-free movement, the stock lost 8.4% year-to-date. Moreover, with uncertainty related to the stock’s financial health and several other factors, FCEL has a “Neutral” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates FCEL:
Trade Grade: C
FCEL is currently trading below its 50-day moving average of $2.53 but above its 200-day moving average of $2.21, indicating that the stock is neither in an uptrend nor in a downtrend. However, the stock’s 12.9% loss over the past three months reflects a short-term bearishness.
FCEL has recently received an $8 million contract from the US Department of Energy’s (DOE) Office of Energy Efficiency and Renewable Energy, in collaboration with the Office of Nuclear Energy, to design and manufacture a SureSource electrolysis platform. The project awarded to FCEL will be the first multi-stack electrolysis system produced with solid oxide technology. The company also announced multiple project awards to provide clean energy to Northeast Power Grid.
However, the company continues burning cash, and one of the alarming metrics is a -70% return on equity. It has successfully raised $177.35 million in gross proceeds from multiple offerings of its common stock between June 2020 and October 2020, giving it some room for breathing. The company intends to utilize the proceeds to fund business operations, including developing projects and expanding presence in South Korea. It has plans to tap other Asian markets as well.
Buy & Hold Grade: C
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, FCEL is not positioned well. The stock is currently trading 34.3% below its 52-week high of $3.50.
Looking at the past three years, the stock has lost more than 91% as the company has not been able to innovate and delivered truly little in its more than five decades of operation. Consequently, FCEL’s top-line has also declined at a CAGR of 17% over the past five years. In November 2019, FCEL expanded a partnership with Exxon Mobil (XOM) worth $60 million for the development of carbon capture and separated the $200 million credit facility as well, which turned out to be a big-time lifeline.
Moreover, short-seller Night Market Research also alleged earlier this month that the company failed to disclose the loss of two of its largest generation-contract awards – the LIPA 2 and LIPA 3. However, FCEL emphatically denied these claims. Moreover, the stock recently charged higher on heavy volume, after a bullish call from JP Morgan (JPM) analyst Paul Coster who believes that the company is “poised to pivot into profitability” after years of investment.
Peer Grade: D
FCEL is currently rated #41 out of 58 stocks in the Industrial – Equipment industry. Other popular stocks in the group are Parker-Hannifin Corporation (PH), Plug Power, Inc. (PLUG), and Bloom Energy Corporation (BE). All of these industry participants have performed better than FCEL on a year-to-date basis. PH, PLUG, and BE gained 10.7%, 415.2%, and 143.2%, respectively, over this period.
Industry Rank: B
FCEL is part of the StockNews.com Industrial – Equipment industry, which is ranked #34 out of the 123 industries. The companies in this industry offer precision parts, products, and systems for applications serving various customers in end-markets. Demand is driven by business and industrial activity, particularly in non-residential construction. The profitability of individual companies depends on the merchandising mix and cost of financing rental inventory.
Overall POWR Rating: C (Neutral)
Despite signing multiple projects recently, FCEL is rated “Neutral” due to its deteriorating financials, short-and-long-term bearishness, and weak price momentum as determined by the four components of our overall POWR Rating.
A gradual transition in the global energy space is already happening, with utility operators shifting toward clean energy sources. FCEL as one of the global leaders in the fuel cell technology space also aims to utilize its proprietary, state-of-the-art fuel cell platforms using clean resources. The company embraces a customer-focused and driven culture but is lacking in global operations and innovative projects. It is presently a speculative investment.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is not impressive for FCEL. The average broker rating of 2.33 indicates an unfavorable analyst sentiment. Of the 3 Wall Street Analysts that rated the stock, 2 have given it a “Hold” rating.
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FCEL shares were trading at $2.15 per share on Wednesday afternoon, down $0.15 (-6.52%). Year-to-date, FCEL has declined -14.34%, versus a 8.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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