It’s here. Renewable energy is finally having its moment in the sun. Or wind. Or plants. Oh, you know what I mean. That’s been good news for FuelCell Energy (NASDAQ:FCEL). But it certainly appears that FCEL stock is surging ahead on not much more than goodwill.
You can’t blame FuelCell investors for being in a bullish mood. For the better part of 2020, many renewable energy stocks were enjoying market-beating growth. But other than a couple of forays above $3 per share, FCEL stock was being held firmly in place.
But all that changed with the presidential election. FuelCell has enjoyed a rally of over 210% since Nov. 3 and is trading at levels investors haven’t seen in two years.
Is it finally time to get excited about the possibilities of hydrogen? To that question, I’d say yes, but that’s not likely to make FuelCell a profitable company anytime soon. And until that changes, there’s no reason to speculate.
100 Days Is Not Enough Time
The only thing with a shorter shelf life than fresh fruit is a freshly minted president. No matter how audacious or austere the campaign promises, at some point, pragmatism rules the day. Put simply, every president in modern history has looked for the quick win. That’s what the whole “100 days” thing is about.
There’s really nothing magical about 100 days. The phrase was first used during President Franklin D. Roosevelt’s first term in 1933. Perhaps the idea was that the electorate would believe that government activity was more important than government productivity. Nothing may actually change, but darn it we’re doing something.
If that was the idea, every president since has swigged that Kool-Aid mightily. Roosevelt created a poison pill for all future presidents who are now required to use the “first 100 days” as a measuring stick. And so it is that President-elect Joe Biden is proposing “100 days of masking.” Did you think that was based on science?
Biden Is Likely to Reach For Low-Hanging Fruit
But back to hydrogen fuel-cell technology and FuelCell in particular. It’s not that there isn’t any future in fuel cells. As our own Sarah Smith wrote, TV analyst Jim Cramer, who has become an oracle of sorts, is now saying that fuel cells may be a better solution than batteries.
But hydrogen fuel cells are still in the ripening process. And there’s low-hanging fruit in wind and solar that a new president can pluck right now — within his first 100 days or at least within his first six months. Heck, let’s give it a full year. We do have a pandemic to work through.
But, if you don’t get my point, it’s that hydrogen is not a quick win for Biden. And FuelCell needs a quick win.
FuelCell Is Still Burning Cash
Just as FCEL stock was surging to $9 per share, the wind came out of its sails. The company raised money through a secondary share offering. There’s nothing wrong with that on its surface. And the company raised enough money to virtually eliminate is net debt.
However, as InvestorPlace writer Thomas Neil wrote, investors should pay attention to the fine print. While secondary shares were being offered, company insiders were selling their shares. That’s rarely a good sign. And it’s a reminder to investors that FuelCell has a long path to profitability — and a fairly narrow one at that.
Don’t Buy the Halo Effect on FCEL Stock
In September, I wrote the following about the prospects for FCEL stock:
“All of this points to the fundamental problem that faces FuelCell and all hydrogen stocks. They will always be in financial trouble until they can generate income without selling shares.
“And FuelCell has a unique problem in that the company operates in perhaps the most expensive niche being occupied by hydrogen fuel cell providers.”
But since then, FuelCell has benefited from the halo effect that is firmly in place for all renewable energy stocks. But hydrogen isn’t ready for primetime right now. And that means when this game of musical chairs ends bursts, it may be hydrogen stocks like FCEL stock that are left without a seat.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.
