PLUG - FuelCell Energy: Another Casualty Of Fading Enthusiasm In The Alt-Energy Space

2023-11-20 14:22:59 ET

Summary

• FuelCell Energy, Inc. shares have fallen drastically since their peak in 2021, despite huge government funding in the alt-energy space.
• The company reported a less than expected GAAP loss in the third quarter.
• A sign the company might be on a verge of a turnaround?  An analysis of FuelCell Energy, Inc. follows in the paragraphs below.

People never lie so much as before an election, during a war, or after a hunt .”? Otto von Bismarck.

Today, we take a deeper look at FuelCell Energy, Inc. ( FCEL ) . The shares of the company have fallen drastically since their peak in 2021, as the enthusiasm around the alt-energy space has deteriorated despite hundreds of billions of dollars of taxpayer largess via legislation like the Inflation Reduction Act. With the stock now just over a buck a share, is there any hope left for its beleaguered shareholders? An analysis follows below.

Company Overview:

This small manufacturing concern is headquartered in Danbury, CT. The firm manufactures and sells stationary fuel cell energy platforms that decarbonize power and produce hydrogen. FuelCell offers various configurations and platforms that provided different megawatt capacity. The company's mission is to:

" become a global leader in decarbonizing power and producing hydrogen through its proprietary, state-of-the-art fuel cell platforms to enable a world empowered by clean energy ."

The stock currently trades at around $1.25 a share and sports an approximate market capitalization of $550 million. The company's revenue stream comes both from product sales, generation revenues, servicing agreements and contract revenues from Advanced Technologies. The company's fiscal year begins on November 1st.

Third Quarter Results :

The company reported its third quarter numbers on September 11th. FuelCell Energy had a GAAP loss of six cents a share, two cents a share above the consensus. The company had a net loss of $23.6 million, an improvement from the almost $29 million net loss of 3Q2022. The company had a net loss from operations of $41.4 million during the quarter compared to $28 million in the same period a year ago. This was driven by an increase in R&D to $15.6 million versus $9.7 million in 3Q2022. Operational expenses also rose to $33.2 million from $23.8 million.

Backlog also shrunk in the quarter although the company did recently sign a 14-year $73 million servicing agreement in Korea.

Revenues fell just over 40% on a year-over-year basis to $25.5 million, some $3 million under expectations. The company had no product sales in the quarter after $18 million were booked in the prior period a year ago. Servicing agreement revenues rose from $9.0 million to $9.8 million; generation revenues were roughly flat at $11 million and revenue from Advanced Technologies rose to $5.2 million from $4.7 million a year ago.

Analyst Commentary & Balance Sheet:

Since third quarter results were posted, six analyst firms including Wells Fargo and Craig-Hallum have reissued Sell or Hold ratings on the stock. Most ratings contained downward price target revisions it should be noted. Price targets proffered range from $1.00 to $2.00 a share.

Approximately one in six shares outstanding in the stock is currently held short. Insiders are neither buying or selling the dip in the equity. In fact, there has not been any insider activity in the stock for nearly two years now. FuelCell Energy ended the third quarter with just under $415 million in cash and marketable securities on the balance sheet . It should be noted that FuelCell Energy raised just over $83 million via is at-the-market offering program during the quarter, continuing to dilute current shareholders. The company listed nearly $110 million of long-term debt on its most recent 10-Q . FuelCell Energy also recently entered into an approximate $80 million non-recourse project financing facility via several banks.

Verdict:

FuelCell Energy lost 38 cents a share in FY2022 on revenues of $130.5 million. The current analyst firm consensus is for losses to come down to 28 cents a share in FY2023 even as sales fall slightly to just over $126. They see similar losses per share in FY2024 even as sales rise significantly to just over $160 million.

FuelCell Energy is hardly the only alt-energy concern that has failed to live up to the initial promise of this space despite massive government funding across the alt-energy universe. Even mighty Siemens Aktiengesellschaft ( SIEGY ) recently went to and received a bailout from the German government due to cost overruns at its wind-turbine business. Closer to home, FuelCell's competitor Plug Power Inc. ( PLUG ) has now missed earnings expectations for 13 straight quarters now while destroying a good deal of shareholder value in the process. That stock also has a short position in its stock of over 25% of its outstanding float.

The bottom line is FuelCell was founded in 1969 and still is not a profitable company. With FuelCell Energy, Inc. likely to lose money for many years on the horizon and likely also continuing to dilute shareholders via additional capital raises, there is no compelling reason to own the shares at the present time despite the huge drop in the stock over the past few years.

Telling lies is a bit like tiling bathrooms - if you don't know how to do it properly, it's best not to try .”? Tom Holt.

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