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Can FuelCell Energy Overcome the Rocky Road Ahead?

There are much better green stocks to add to your portfolio than FCEL stock

FuelCell Energy (NASDAQ:FCEL) has managed to hang in there for the past five decades without being commercially viable. However, with its listless response to the growing trend towards renewable energy and the looming threat of solar-plus-storage, it seems that FCEL stock is in for a torrid time ahead.

a picture of a fuel cell
Source: Kaca Skokanova/Shutterstock

Analysts believe that a bubble is developing in the industry fueled by the growing trend towards renewable energy.

So far, FuelCell’s competitors have been more proactive in pursuing the trend. Bloom (NYSE:BE) plans to introduce an electrolyzer for its fuel cells by next year, and Plug Power (NASDAQ:PLUG) has also acquired a company producing electrolyzers a couple of months ago. Electrolyzers use renewable energy sources to separate water into hydrogen and oxygen.

With that being said, let’s look at FuelCell’s position in a little more detail. That way we can truly determine if FCEL stock is worth your money.

Hydrogen Viability for Heavy Transport

The use of hydrogen fuel cells for heavy-duty vehicles is still in its nascent stage, but could prove to be a disruptive technology soon. Unfortunately, it has taken a back-seat to electric vehicles (EV’s), which have dominated the investment pie here. This leaves little for the expansion of hydrogen fuel cells, which isn’t good news for FCEL stock moving forward. Steering it out of infancy requires massive investments in production, transport and refueling station infrastructure.

Hydrogen fuel cells can be more viable than EV’s in the long run due to their lower charging time. Downtime results in higher expenses and less productivity. Although their viability still remains a concern, things are still gradually moving along. Fuel cell manufacturers are still working to cement their position in the industry.

Meanwhile, green vehicle producer, Nikola (NASDAQ:NKLA) announced that it will produce a fleet of fuel-cell-powered trucks. Plug Power will also apply fuel-cell technology to heavy-duty trucks. Moreover, Bloom also announced its association with Korea’s SK Group. The contracts will supply Bloom with hydrogen-powered fuel cells in 2022. On the other hand, FuelCell has been pushing hard to make its core product line, SureSource, greener, with its $60 million deal with Exxon Mobil (NYSE:XOM).

No Clear Path Towards Profitability

One of the primary problems with FuelCell is its inability to turn a profit. However, the company narrowed down its net loss to $14.8 million from $19.5 million a year earlier in its most recent quarter. Still, profitability eludes the company, as it hasn’t proven to be economically competitive compared to traditional technologies.

Despite some encouraging results, there’s still plenty of uncertainty about FuelCell’s long-term positioning. The provision of baseload power is one of the advantages the company has had over alternative energies. Solar and wind energy have proven ineffective in matching its baseload power cost efficiency. However, the trend towards the use of cheap lithium batteries is shaking things up. The baseload problem will be less of an issue for renewable technologies.

Solar-plus storage is a direct competitor to FuelCell, and companies such as Tesla (NASDAQ:TSLA) are investing heavily in the industry. Therefore, solar-plus-storage could potentially become a significant threat to the hydrogen fuel cell industry. This in turn, could hinder the long-term case for FCEL stock.

The Final Word on FCEL Stock

FuelCell doesn’t deserve any leeway from investors at this point.

Its financials paint a grim future about its prospects. Additionally, it has done little to overcome its competitors. FuelCell has struggled to leverage its resources towards renewable energy, where others have already succeed. Furthermore, the looming threat of solar-plus-storage adds salt to the wound for FCEL stock. It could essentially render its products obsolete.

Other companies such as Plug Power have proven to be more successful in recent times. They have with sticky partnerships that complement their core businesses. As such, FCEL stock isn’t the best green stock to invest in right now.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University. He does not directly own the securities mentioned above. 

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