The late May/early June Reddit stock/meme stock wave may have sent Clean Energy Fuels (NASDAQ:CLNE) stock back to double-digit price levels. But as seen from recent price action, this factor is no longer helping to boost this renewable energy play.
Like we’ve seen play out with other Reddit favorites, like AMC Entertainment (NYSE:AMC), Clover Health (NASDAQ:CLOV) and GameStop (NYSE:GME), this latest wave of madness has run out of gas. Unless we see another wave emerge, most of these names will likely come down in price.
That may be the case here too with Clean Energy Fuels. Sure, there’s plenty to be said about its underlying prospects (as a supplier of renewable natural gas, or RNG). Yet most who bought it in recent months only did so to ride its (now-fading) meme stock momentum. Yes, short interest may be on the rise. But that may not guarantee a squeeze.
Instead, if the Reddit stock phenomenon fails to crop up again and those long the stock today look to cash out, prices are more likely to pull back into the single digits rather than make another run toward $20.
What Next for CLNE Stock?
Pulling back in the past few weeks, does Clean Energy Fuels have a shot of bounce back in the short-term? There’s been a bit of talk among speculators online about its short-squeeze potential. But looking at the facts, it’s hard to see this playing out.
Short interest in CLNE stock isn’t that high. Only 8.8% of its outstanding float has been sold short. Admittedly, given this number is as of June 15, it may be substantially higher now. In the trading days following June 15, especially on June 18, more than 50 million additional shares have been sold short. This may mean short interest now stands at levels we’ve seen with names like Clover.
Yet, that doesn’t mean a squeeze is in the cards. Chances are the so-called “smart money” short sellers have smarted up their strategy, post-GameStop. Sizing their short positions more cautiously, they have greater ability to stay the course, waiting for the longs to eventually blink.
This is similar to what may be playing out right now with AMC stock. AMC could stay inflated in the near term. But in terms of its eventual collapse, it’s likely a matter of when, not if.
Unlike shares in the movie theater chain, Clean Energy Fuels at least has something besides meme stock madness in its corner. That would be its exposure to the renewable energy megatrend. As businesses look to reduce their carbon emissions, its somewhat humorous alternative (natural gas derived from animal waste) may continue to rapidly rise in usage.
There’s One Area Where it’s Not Running Out of Gas
The Reddit rally in CLNE stock may be running out of gas. But it’s certainly not running out gas with its underlying business (pun intended). That is, as it is now primarily a purveyor of RNG, its future remains bright. The humor derived from a major source of RNG (animal waste) may be part of the reason this stock has caught on with the r/WallStreetBets community.
You can make many sophomoric jokes about its operations. Yet, it’s still serious business for Clean Energy Fuels. In 2021, it’s projected to generate just under $300 million in revenue. Next year? The top end of estimates call for it to generate as much as $403.9 million in sales.
Not only that, growth could be on the verge of accelerating. As InvestorPlace’s Luke Lango broke it down June 15, if the company leverages its strengths, it could increase its RNG sales by more than ten-fold by 2030.
With that level of runway, it’s not wise to bet against it over the long haul. But that doesn’t mean it’s set to hold steady, or get squeezed higher, in the near term. Instead, as this latest wave continues to run its course, the opportunity to get into CLNE stock at a much lower price may be on the horizon.
The Bottom Line
So, what’s the overall verdict with Clean Energy Fuels? A bit of good news, and a bit of bad news. The good news is that it’s in the camp of meme stocks that have plenty of substance to go with the hype. The bad news? This substance may not be enough to keep the stock at double digits in the near term.
With its true potential still years away from realization, unless the crowded short-side blinks before the retail traders long the stock do, you may have the ability to scoop up CLNE stock at much lower prices down the road.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
