FuelCell Energy Inc. (FCEL) is a global leader in designing, manufacturing, and operating direct fuel cell power plants that run on natural gas and biogas. The company has over 50 plants all over the world. FuelCell Energy Inc. is a company with a long history of been publicly traded and was added to the Russell 3000 Index in 2020. Just last October, FuelCell was a penny stock trading below $2 and soared when the Biden administration came to power.
Biden’s Green Plan Sent the Stock Soaring
After the stock started to explode in November 2020, last month the stock experienced a fall in its price, but the stock has gone up about 65% this year, and 633% higher in the last 12 months. The surge in the stock was mainly fueled by the announcement of Biden’s Green New Deal which aims to achieve a 100% clean energy economy in the U.S., net-zero emission by 2050, and to address the threat of climate change. With the new plan, the global fuel cell market is expected to grow to $33 billion by 2027 from $10 billion in 2019.
Cause of The Downturn in The Stock
The main reason for the downturn of FuelCell’s stock was because Paul Coster, an analyst at JP Morgan Chase, downgraded FuelCell stock saying it’s ‘richly valued’. As he did that the stock went down by 11% in January. According to Coster, the estimated target price of the stock is $10.
Again, the stock took a dip last month because of the news that FuelCell’s competitor Norweigian company TECO 2030 is planning to build a larger-scale fuel cell production facility partnering with Austrian Engineering company AVL which is expected to be completed by 2022.
These reasons have driven investors to sell FuelCell’s stock. Although it is uncertain whether it is a guaranteed stock with sound returns or whether it is time to pull the plug on this stock, investors need to keep in mind that the Green New Deal is a 10-year plan, and companies in the hydrogen fuel cell market like FuelCell are not going to reap the benefits overnight and that it will take some time.
Future Projects FuelCell Is involved In
The company announced four projects awarded by the local distribution companies to provide clean energy to Northeastern Power Grid. The selected projects include a 2.8-megawatt project located in New Britain, CT; East Hartford, CT; Derby, CT; and Danbury, CT. The projects are expected to provide “clean baseload power, grid resiliency benefits, and renewable energy credits to the Connecticut utilities under 20-year agreements”. The company also expects to enter into the South Korean market directly after it had a falling out with South Korean energy company Posco.
Takeaway
Fuelcell’s stock has seen significant growth from November 2020 through February, and the growth of the stock seems to be tied to the Green New Deal. Despite the different opinions, the outlook for FuelCell’s stock appears to be positive so far because of the Biden administration’s plan to reinstate green energy projects. Before making any investment decision, investors should also monitor if the company’s revenue and margins are poised to improve in the coming years.
Disclosure: The author did not own any shares in any of the stocks mentioned in this article.
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