Fuel Cell Energy (FCEL) stock has been on quite a ride in the past year. It’s up more than 1000% in the past 12 months. Yet year to date, the stock is only up 273%. That seems a bit odd, but it shows how alternative energy stocks are powering ahead with little resistance.
First, Fuel Cell Energy’s origin story. The company is similar to Bloom Energy (BE) in that it uses a fuel cell to convert natural gas or biogas into electricity. The middle part of the conversion – using a proprietary molten carbonate fuel cell technology – produces hydrogen.
How Fuel Cell Energy Does It
The company’s distributed generation equipment produces clean power from scalable generation units for commercial, institutional and utility use. Plus, the units are relatively compact, so they’re good for placing in dense urban areas.
Because of its proprietary fuel cell, it can generate hydrogen directly from its feed stock that can be used to generate electricity or can be stored as hydrogen to either be distributed for use in hydrogen-powered vehicles or used as energy for its generators later.
It’s a very sleek process and the company has been around since 1969, so it isn’t a johnny-come-lately to the energy markets.
A Hot Stock in a Cool Sector
This year has been a boon for alternative energy companies. From the massive fires in the West and flooding across the nation, more people are realizing that energy insecurity is getting closer to their homes.
Plus, we have an electrical grid that would look familiar to Thomas Edison and yet almost all our devices have electrical components – far more than in Edison’s day.
Then we had a massive shift in energy resources. Coal had been dying for years and natural gas became a new, cleaner option. And the U.S. has massive amounts of natural gas.
Then the pandemic hit and oil crashed due to global lockdowns. In that turmoil, institutional investors began to make known to the investment companies running their investment funds that they weren’t interested in oil any longer. They started to insist their money go toward environmental, social and governance-focused companies. This is now called ESG investing. And it has meant a major shift in trillions of dollar of investment capital.
Finally, the election of Joe Biden as president has turbocharged ESG investing because the money is on his administration to address climate change and pave the way for renewable and green energy.
The Other Side of the Coin for FCEL Stock
However, FCEL stock and many others like it have benefited from all of these trends yet haven’t been delivering numbers that support all the enthusiasm. Now, that hasn’t seemed to stopped Fuel Cell Energy from prospering.
And it’s quite likely that before we can see “green hydrogen” everywhere, we’ll be using “grey hydrogen” for a while. Green hydrogen is produced with renewable resources. Grey hydrogen is produced from fossil fuels like natural gas. And, blue hydrogen is produced with low-emission non-renewables like nuclear.
Also, FCEL stock isn’t turning a profit and earnings per share are negative, which used to matter. There’s also a significant short position against the company, amounting to 11% of its outstanding shares.
But a troublesome issue is Fuel Cell Energy continues to issue more stock as its prices rise. Usually this is a sign that a small company can’t raise funding, so it dilutes its share price by issuing more stock to raise capital.
The fact is, FCEL stock has a lot going for it. But the question is whether it’s a buy at any price.
Given its long boom-and-bust past, and the fact that its 52-week low is 81 cents, there’s some real risk here. And the higher the stock price goes, the more the risk outpaces its short- to intermediate-term potential.
On the date of publication, the author did not have (either directly or indirectly) positions in any of the securities mentioned in this article.