Fuel Cells: FCEL, BLDP and PLUG Stock Have Gone Berserk

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Ballard Power (BLDP), FuelCell Energy (FCEL) and Plug Power (PLUG) are a trio of energy stocks that have had more twists and turns than a daytime soap opera. And the recent performance in BLDP, FCEL and PLUG stock has led me to the following conclusion:

plug-power-plug-stock-fcel-bldpThe investing world is a few fries short of a Happy Meal.

I don’t know how else to explain the outperformance of these stocks, whose companies focus on fuel-cell technology. Ballard, Fuel Cell and Plug Power aren’t profitable and haven’t been so for years, and Wall Street analysts see red ink at these companies to continue for a while. And while there have been some signs that these companies are turning the corner, it doesn’t appear as though they will make money on a consistent basis for a while.

And yet … BLDP has surged more than 235% since the start of the year. FCEL is up more than 132%. And PLUG stock has skyrocketed nearly 300%.

Watch Out for BLDP, FCEL and PLUG Stock

Unfortunately, investors have gotten badly burned by this sector before. Shares of these companies skyrocketed along with other clean-energy names during the dot-com bubble, only to come crashing to earth. For example, even after PLUG stock’s monster 2014, shares still are off 99.7% from their 2000 reverse-split-adjusted price of nearly $1,500.

Granted, times have changed. Fuel cell technology has gotten better and more economical thanks to cheap, abundant supplies of natural gas, which they need to convert hydrogen and oxygen into electricity.

The technology, though, still isn’t economically viable.

As Quartz noted last year, fuel cell-generated electricity costs between 14 cents to 15 cents per kilowatt-hour, more than double the 6 cents to 9 cents per kWh that natural gas-created power costs. Coal-generated electricity costs 7 to 15 cents.

Like other types of alternative energy, fuel cell providers have stayed afloat courtesy of taxpayers. That’s because of their green benefits — fuel cells have a significant advantage over other types of conventional electric generation because they produce no pollution.

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So when evaluating these stocks, people have thrown away their calculators and are relying on their gut, which has created some interesting charts.

These stocks have experienced some recent blowback, though for odd reasons. PLUG stock plummeted more than 40% Tuesday (and FCEL and BLDP also took double-digit hits) after a Wall Street analyst estimated Plug Power’s fair value at 50 cents. That’s pretty harsh considering that shares traded above $11 recently, but probably closer to the truth than current prices.

But what’s most bizarre about it is that the Citron Research analyst who doled out the report referred to Plug Power as a “casino stock.”

Which it is not.

For now, all eyes in the fuel cell world are on Plug Power, which reports quarterly results Friday.

PLUG stock has shot up in the wake of its recent announcement about a huge order from Walmart (WMT) for more than 1,700 units to power forklifts. Although Plug Power gained headlines in December when it forecast that it would be profitable this year, analysts remain cautious because the company was vague about specifics. Forecasts call for Plug Power to lose money in the December and March quarters and for 2013 and 2014, respectively.

Orders also are flowing to FuelCell Energy. However, FCEL also lost money in the latest quarter — $11.4 million, or 6 cents per share — though it did generate a 4-cent profit excluding one-time items. More promising, revenue rose 22 percent to $44.4 million, fueled by demand from South Korea, where it has a huge contract. FuelCell Energy also has an alliance with NRG Energy (NRG) to sell its products to power producers. Expectations are that FCEL will turn a profit sometime in 2014, though it’s unclear when that will happen.

Ballard once commanded $200 per share and a stratospheric market valuation topping $3.4 billion back in 2000. It crashed after that, and in 2007, BLDP unloaded its automotive fuel cell business to Ford (F) and DaimlerChrysler and since then has focused on decidedly unsexy markets such as forklifts or backup power systems for cell towers. Most importantly, however — and something Citron points out — is that Ballard also makes the stacks used in Plug Power’s fuel cells.

Scaling back, though, was the right call. Ballard lost just 2 cents per share in Q4 2013 vs. a 19-cent loss in the year-ago period, and for the full year, 2013 losses were just 20 cents vs. 48 cents in 2012. Meanwhile, revenue rose 5% to $17.3 million in Q4 and 40% to $61.3 million for the year.

However, while BLDP confidently predicted that its revenue growth would top 40% this year, it was fuzzy about its bottom line, saying that it would have “approximately breakeven adjusted EBITDA.”

Way to go out on a limb.

Bottom Line

Today would be a good time to buy PLUG stock, FCEL and BLDP if you have a high tolerance for risk or are a masochist. But just as you can be assured that the sun will rise tomorrow, shares of overly hyped momentum stocks will soar again and then fall. Timing these purchases are impossible, so if you’re a more conservative investor, it’s best to avoid the sector entirely.

And if you do have money burning a hole in your pocket plus an itch for green energy, you’d probably be better off picking Best Stocks for 2014 leader Tesla (TSLA). It’s risky too, but at least it has recorded a profit at one point.

As of this writing, Jonathan Berr did not hold a position in any of the aforementioned securities.

Jonathan Berr is an award-winning freelance journalist who has focused on business news since 1997. He’s luckier with his investments than his beloved yet underachieving Philadelphia sports teams.


Article printed from InvestorPlace Media, https://investorplace.com/2014/03/fcel-bldp-plug-stock/.

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