It has been another good week for FuelCell Energy (FCEL), with shares up nearly 21%. Over the past year such advances have been commonplace, as the stock has been a prime beneficiary of the market’s appetite for hydrogen-focused stocks. Further bolstering the bull-case, President Biden recently outlined his climate agenda, and, unsurprisingly, renewables and clean energy are high up on the new administration’s list of priorities. One of Biden’s first acts as president was rejoin to the Paris Climate Agreement.
The plan was announced on the same day FuelCell reported 4Q20 earnings. Investors appeared to shrug off the less-than-stellar results and nudged shares higher due to the positive macro developments.
In 4Q20, the company’s revenue jumped 54% year-over-year to $17 million, coming in just under the Street’s forecast by $50,000. FuelCell reported a net loss of eight cents per share, which was four cents per share worse than Wall Street estimates.
Despite the wider-than-expected losses, J.P Morgan analyst Paul Coster says the company is “executing to plan,” although the analyst has some reservations.
“FCEL met 4Q expectations and exited 2020 with a much-improved balance sheet, positioning the company to execute on backlog, reducing financing costs, and develop and commercialize new applications in 2021,” the analyst said. “This was an encouraging print, but it does not represent an inflection point, and the journey toward EBITDA profitability next year, requires solid execution whilst investing in a large number of initiatives.”
Coster thinks the long-term outlook for FuelCell is favorable and notes the company’s “versatile technology is well-suited to many applications.”
That said, over the last 12 months, shares have soared by a phenomenal 1,172%, and for Coster, all future potential is baked into the valuation.
The analyst, therefore, reiterated an Underperform (i.e. Sell) rating on the shares, and his $10 price target implies ~54% downside potential. (To watch Coster’s track record, click here)
Valuation also remains a concern for Oppenheimer analyst Colin Rusch. The 5-star analyst rates FCEL a Perform (i.e. Hold), without suggesting a price target.
To the company's credit, the backlog – the orders that require completion - decreased by 2.5% from $1.32 billion in F4Q19 to $1.29 billion at the end of the latest quarter.
The updated backlog, says Rusch, “Reflects the continued execution of the company's existing power purchase agreements, service and maintenance contracts, and Advanced Technology programs.”
Yet, the analyst is looking for “further validation of R&D efforts driving improved unit economics and expanded offerings in hydrogen fuel and carbon capture,” to fully get behind the company.
Ultimately, the word on the Street points to a sidelined majority on FuelCell. In the last three months, the power equipment maker has landed 4 Hold ratings and 1 Sell. At $10.25, the average price target suggests a 53% downturn in the year ahead. (See FCEL stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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January 29, 2021 at 10:16AM
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