It’s fair to say that 2020 was a terrific year for investors of FuelCell Energy (NASDAQ:FCEL). Indeed, FCEL stock was a real sleeper in 2019 and most of 2020 but then rose to the occasion and ended the year with stunning gains.
Ironically, FCEL is a sustainability stock, yet some investors might worry that its gains aren’t sustainable. Their narrative would be that the share price has gone up too far, too fast and that gravity must take effect at some point.
I certainly won’t deny that gravity, also known as profit taking, is a force to consider in the markets. However, an argument could be made that profit taking has already occurred, and that this is a setup for the next leg up in FCEL stock.
Moreover, FuelCell offers long-term exposure to a number of concurrent trends that are likely to persist in the coming months. With that in mind, the bulls have a strong argument in favor of holding FCEL stock at the current price point.
FCEL Stock at a Glance
For many consecutive months, the debate over FCEL stock was about whether it would ever break out of penny-stock territory. Remember, a penny stock is defined by the U.S. Securities and Exchange Commission (SEC) as a stock trading for less than $5.
The quest to rise above $5 seemed like a pipe dream as FCEL stock struggled to reach $3 for much of 2019 and 2020. Then came November of 2020, in which the buyers bid FCEL shares all the way up to $10.
December saw a continuation of that bull run, with FCEL stock attaining a 52-week high of $13.91. A pullback did occur after that surge, however. By the end of the year, FCEL was trading near $11.50.
Thus, if contrarians were looking for gravity to take effect, then their wish came true. The uptrend is still intact, yet the price has come down far enough to spark the interest of dip buyers.
A Pro-ESG Market Environment
For the coming year, investors should expect the trading community to put environmental, social and governance (ESG) stocks in the spotlight.
ESG stocks are the domain of socially conscious investors. New generations of traders want to feel good about their investments. This trend is reflected in a surge of interest in more “mindful” companies like FuelCell Energy.
Strategists at Morgan Stanley noted that cash inflows into ESG funds increased significantly in 2020. In fact, flows into ESG funds catapulted to $47 billion in November. That’s a massive increase compared to the monthly average of $13 billion in 2019.
You may already be aware of U.S. President-elect Joseph Biden’s intention to implement a plan that includes “a 100% clean energy economy and net-zero emissions no later than 2050.”
Perhaps you’re also familiar with the European Green Deal. In this, the European Union seeks “to make the EU the world’s first climate neutral continent by 2050.” Technologies such as hydrogen and fuel cells will likely be an essential component of this ambitious initiative.
Poised to Profit
As a top provider of hydrogen fuel cells and other clean energy solutions, FuelCell Energy is poised to capitalize on in the new ESG-friendly economy.
The company’s SureSource Storage solution offers “round trip energy efficiency above 70%.” As nations and even entire continents seek to reduce their carbon footprints, FuelCell’s SureSource Storage solution can provide clean and durable power to electric grids in multiple geographies.
Yet another positive angle for FuelCell Energy is the Chinese green-energy market. China is pushing for carbon neutrality by 2060. As part of this, “Nine of every 10 vehicles on China’s roads will have to run on non-fossil fuels.”
Back in the U.S., Congress recently offered a nice incentive for ESG-minded businesses. In particular, Congress extended the 26% investment tax credit for fuel cells for two years.
The Takeaway
Will a great year for FCEL stockholders be followed by an even better one? There are no guarantees, of course. Yet, the market environment is right for FuelCell Energy to prosper.
And if you’re worried about gravity taking over, just relax. The pullback in FCEL stock already happened in December. This should set the stage for further long-term gains for FuelCell.
FCEL stock currently has a “B” rating and a buy recommendation in my Portfolio Grader.
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.
