The situation for FuelCell Energy (NASDAQ:FCEL) in 2020 has not been short of drama — at least not in the fall. The latest development began unfolding on Tuesday. After posting a gain of nearly 260% over the course of two weeks to close at $10.20 on Nov. 30, FCEL stock has plummeted more than 25% over the past few days.
What on earth is is going on here to cause such major moves? Why the sudden reversal in fortune? And most importantly for investors, does the current situation represent an opportunity to snag a clean energy stock that was exploding? Or is the current situation a warning sign that it’s perhaps better to sit back and see what happens before making any moves? After all, this company was on my list of “6 Hydrogen Stocks to Buy For the Next Generation of Travel.” A list, I should note, that was published just days before the drama began.
Why the FCEL Stock Drama Since November?
Before getting into a deeper look at FuelCell, let’s have a look at what has been going on over the past few weeks.
FuelCell Energy is in the business of hydrogen power. The company offers a range of hydrogen fuel-cell power-generation solutions. Ultra-clean, green power generation like this was already in the spotlight in 2020. Especially as it began to become apparent that the world had seen peak oil demand. Electric car stocks have been going through the roof, and the spotlight is on preventing climate change from becoming catastrophic.
What juiced FCEL stock at the start of November was the victory of President-elect Joe Biden on Nov. 7. One of Biden’s key campaign policies was a $2 trillion plan to overhaul transportation and energy infrastructure. With an emphasis on green energy, the Biden administration is seen as a huge booster for companies like FuelCell Energy. Once it became clear that Biden had won the presidency, that lit a fire under FCEL stock.
Why did it suddenly begin to crash?
On Dec. 1, FuelCell announced the release of 34,518,539 shares of its common stock at $6.50 per share. The company says it will be using the proceeds to pay debt. However, adding an element of mystery to the move was the news that nearly 14.7 million of those shares will be sold by “certain selling stockholders.” Why are these “certain selling stockholders” dumping their shares en masse? Suspicion and panic ensued, and FuelCell stock has been feeling the brunt of that reaction for two days now. It’s not pretty, especially for those who bought shares in the past few weeks.
If you want more detail about this situation with FCEL stock, check out this excellent explainer from InvestorPlace’s Sarah Smith.
Long-Term Growth Potential Is There
The market reaction to FuelCell stock since the start of November has had the effect of eclipsing the basic appeal of FuelCell Energy. Yes, the Biden administration’s focus on clean energy is going to benefit FuelCell. But this is a company that was seeing the energy market beginning to turn in its direction anyway.
Five years ago — when FCEL stock was nearing $100 — it was too soon. Green energy was making inroads, but hydrogen fuel-cell power generation was too far in the future. Now, it’s actually practical and being deployed. FuelCell Energy says that as of May, more than 10 million megawatt hours of energy was being generated by its SureSource power plants.
In addition, FuelCell technology can produce hydrogen for transportation and industrial applications. That capability was a big reason why I included FuelCell — which has a “B” rating in Portfolio Grader — on my list of hydrogen stocks. With its own hydrogen generation and distribution capability, FCEL has been positioning itself as a future equivalent to today’s big oil companies.
Bottom Line on FCEL Stock
Shares were going for $2.39 at the start of November, when I wrote about the potential for FCEL stock to deliver long-term growth. I still feel that way, but I do have a hard time recommending it at current levels — nearly three times that price, even after its recent pummeling. Instead, I would say keep FCEL on your radar and see how this plays out.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.