Summary
- Today, we take our first look at alt energy solutions provider FuelCell Energy, Inc.
- The company has big plans for the future despite a history of not delivering for shareholders.
- Can FuelCell deliver on its promises this time around? An investment analysis follows in the paragraphs below.
Liars make the best promises . ? Pierce Brown, Golden Son
Today, we put FuelCell Energy Inc. ( FCEL ) in the spotlight for the first time. Few companies have destroyed more shareholder value in the 21st century than this alt-energy concern. However, the company does have a large order backlog and management is projecting big things for the future. Is the hype real this time around? An analysis follows below.
Company Overview:
FuelCell Energy is located in Danbury, CT. The company designs, manufactures and sells stationary fuel cell power plants for distributed baseload power generation. The company also offers installation, licensing, and other services around these projects. FuelCell's technology solutions produce hydrogen through their proprietary fuel cell platforms. The stock currently trades at just north of four bucks a share and sports an approximate $1.6 billion market capitalization.
To date the company has nearly 100 fuel cell platforms in operation with aggregate capacity of approximately 225 MW. FuelCell Energy offers a broad range of services that can be matched to the specific needs of the fuel cell project with comprehensive service agreements up to 20 years in duration.
Second Quarter Results:
On June 9th, the company posted second quarter numbers . It was a disaster of a quarter as far as missing expectations. FuelCell had a GAAP net loss of eight cents a share, a few pennies below the consensus. The company also reported that revenues grew 17% on year-over-year to $16.4 million for the quarter. However, the consensus was expecting revenues to be nearly twice that to just over $32 million.
FuelCell posted a net loss totaled $30.1 million in the quarter up from a net loss of $18.9 million 2Q2021. Q2 adjusted EBITDA was a negative $21.2 million compared to a negative $11.3 million adjusted EBITDA in the same period a year ago. Operating expenses contributed to the increase in the losses for the quarter as they jumped to $20.9 million to $12.6 million in the year ago period. Also contributing to the larger net loss for the quarter were $4.8 million of non-recoverable costs related to the construction of the Toyota project, higher manufacturing variances, and lower Advanced Technologies margins.
FuelCell is ramping up capital expenditures and R&D activities in FY2022 to both accelerate commercialization of its solutions and expand its operating portfolio which will deliver recurring revenues.
Despite the dismal quarter, the company's CEO was upbeat and, in one of the better examples I have come across recently of trying to put ' lipstick on a pig ', reiterated what he said at the company's recent Investor Day.
There are approximately $2 trillion in combined, cumulative total addressable market opportunities through 2030 which we believe may be served by our commercially available solutions and solutions that are actively under development by the Company. We also shared our aspiration to have a substantial impact on addressing climate change and deliver revenue of over $300 million by the end of fiscal year 2025 and revenue of over $1 billion by the end of fiscal year 2030. In order to reach these goals, we are, among other things, investing in commercializing our technologies and adding to our capabilities, both in terms of manufacturing capacity and talent .
Backlog was up slightly for the quarter to just north or $1.3 billion.
Analyst Commentary & Balance Sheet:
8 analyst firms including JP Morgan and Cowen & Co. have chimed in around FuelCell Energy in 2022 to date. All eight have a Hold or Sell rating on the company as FuelCell seems one of the most disliked stocks in the market right now within the analyst community. Some 15% of the outstanding float is also currently held short. Nor are insiders buying the drop in the shares, as there has been no insider activity in the stock so far in 2022.
After losing just over $30 million in the second quarter of this year, the company had just over $400 million of cash, marketable securities, and equivalents.
Verdict:
The current analyst consensus has the company losing around a quarter a share in FY2022 even as revenues soar over 85% to some $130 million. That loss is projected to be cut slightly in FY2023 on sales of just over $150 million.
FuelCell Energy has aspirational goals and projects it will deliver $300 million in revenues in FY2025 where it will achieve profitability and will hit $1 billion in sales in FY2030. Given the history of the company, it is hard not to take those projections without a huge grain of salt.
FuelCell was founded in the late 1960s and came public thirty years ago. In that time the company has failed to do much but destroy shareholder value and consistently miss expectations. A recent article on Seeking Alpha did a nice job detailing some recent significant project delays. Therefore, until the company starts to under promise and overdeliver for a change, the stock is an avoid.
A graceful refusal is better than a lengthy promise . ? Hazrat Ali Ibn Abu-Talib A.S
For further details see:
FuelCell Energy: Putting Lipstick On A Pig