FuelCell Energy (NASDAQ:FCEL) is an ambitious provider of environmentally friendly fuel-cell systems. It’s encouraging to see FuelCell Energy partnering with premier businesses to accelerate clean-energy initiatives. At the same time, cautious investors should stay away from FCEL stock until the company improves its financials.
Russia’s invasion of Ukraine has compelled some nations and businesses to consider a faster transition to cleaner fuel sources. As fossil fuels become increasingly expensive, FuelCell Energy could be poised to benefit in the coming months and years.
In that vein, FuelCell Energy seems quite confident of its growth story as the company partners with top-tier clean-energy-focused businesses. Nevertheless, a risk-off stance is wise as FuelCell Energy still has to “solve the solvency problem,” so to speak.
What’s Happening With FCEL Stock?
The best way to describe FCEL stock’s price action in 2022 so far is volatile but generally negative. It was briefly a $7-ish stock in March, but recently has floundered in the $3s.
This certainly isn’t to suggest that there are no positive catalysts at all. Indeed, FuelCell Energy is collaborating with notable partners to lead the burgeoning renewable energy movement.
First, FuelCell Energy just executed a memorandum of understanding with clean energy developer TuNur. The two companies’ target region is Tunisia, where they intend to deploy FuelCell’s “differentiated electrolysis platform to produce low-to-zero-carbon hydrogen,” according to FuelCell Energy President and CEO Jason Few.
Prasanna Joshi, vice president of Exxon Mobil Technology and Engineering Company, specified that the agreement is intended to “continue joint development of a novel technology that may accelerate deployment of carbon capture in industrial sectors.”
Financial Fault Lines
These collaborations should provide some encouragement to downtrodden FCEL stockholders. Still, it’s difficult to recommend an investment in FuelCell Energy now if there are cracks in the company’s fiscal foundation.
Not to be the bearer of bad news, but FuelCell’s second-quarter fiscal 2022 results weren’t stellar. Sure, the company’s quarterly revenue increased 17.4% year over year to $16.38 million. However, this result was only around half of the FactSet analyst consensus estimate of $32.58 million.
Turning to the bottom-line results, FuelCell Energy’s adjusted EBITDA declined from -$11.33 million in the prior-year quarter to -$21.19 million in Q2 of FY2022. In that same time frame, FuelCell’s net earnings loss widened from 6 cents per share to 8 cents per share. The analysts, evidently, had hoped that FuelCell’s net loss would narrow to 5 cents per share.
In other words, FuelCell Energy isn’t a profitable company and its bottom-line results are moving in the wrong direction. Going forward, investors should insist that FuelCell take decisive action to improve its financials.
What You Can Do Now
FuelCell Energy is clearly proud of its clean-energy collaborations, and that’s understandable. They should provide value to the company, its stakeholders and the sustainability movement in general.
On the other hand, investors should know that financials matter, even when the objective is a cleaner planet. Consequently, FCEL stock won’t be a high-conviction investment until/unless FuelCell Energy steers its bottom-line results in the right direction.
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On the date of publication, David Moadel 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.