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Why fuel cell energy inc stock popped


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Shares of FuelCell Energy jumped today on news of new research funding. But the impact won't be felt for years to come and investors shouldn't run out and buy shares today.

Published in: Economy & Finance

Why fuel cell energy inc stock popped

  1. 1. Why Fuel Cell Energy Inc Stock Popped
  2. 2. Fuel Cell Energy’s shares jumped FuelCell Energy’s shares are up 13% after the company announced a 3-year, 5 million Euro research project for the German Federal Ministry for Economic Affairs and Energy. • The award will support research by Fuel Cell Energy and joint venture partner Fraunhofer IKTS. • The research aims to improve Direct FuelCell technology by increasing power density and operating life of fuel cells. • Research will take place in Germany.
  3. 3. Goal is to improve performance The goal of the research is to improve performance of fuel cells long-term and is part of Germany’s commitment to alternative energy. • There were no details on the potential financial impact for FuelCell Energy from a sales or earnings standpoint. • Impact from the research would likely be years down the road.
  4. 4. Award is small for FuelCell Energy When put into perspective, this is a small award for FuelCell Energy, especially when you consider that it’s to a joint venture. • The 5 million Euro ($6.73 million) over three years compares to $14.4 million in technology contracts in 2013. • Revenue last fiscal year was $187.7 million. • Today’s stock pop added about $75 million to the company’s value. 2.8 MW power plant from FuelCell Energy. Source: FuelCell Energy.
  5. 5. Losses will continue This does little to change FuelCell Energy’s financial struggles. Revenue has grown over the past decade but losses persist.
  6. 6. If losses continue, so will dilution Financial losses have forced management to sell shares to stay afloat, diluting shareholders. This deal does nothing to change that.
  7. 7. More research is good, but no immediate impact This deal does little to improve financials near-term so the pop in the stock may not last. • Fuel cell related stocks have been incredibly volatile this year – both up and down – but eventually they need to start showing financial progress. • This does little to improve those finances.
  8. 8. Now is not the time to buy This does little to change the investment thesis long-term. • When the research project is put in perspective it’s small in comparison to what FuelCell Energy already spends on research. • Until management shows fruit from this research I don’t see it as a reason to buy. • The market’s reaction seems very overdone and I wouldn’t be surprised to see shares fade in coming days.
  9. 9. Fuel cells are hot but there’s a more profitable way to play energy. Find out the stocks benefitting from the energy boom here.
  10. 10. Fuel cells are hot but there’s a more profitable way to play energy. Find out the stocks benefitting from the energy boom here.