Has the clean energy movement stalled in 2022? Not really, although economic troubles weighed on promising companies like Fuelcell Energy (NASDAQ: FCEL). Still, the US government hasn’t abandoned alternative fuel sources, and I’m bullish on shares of Fuelcell Energy as the company has managed to grow revenue despite financial headwinds this year.
Originating in Connecticut, Fuelcell Energy provides fuel cell energy platforms that produce hydrogen. If you’re looking for an affordable stock that offers pure exposure to the hydrogen generation market, FCEL stock is among the most obvious choices.
Don’t get me wrong here – FCEL stock is moving fast with a five-year monthly beta of 3.58. In other words, it is a volatile investment and only suitable for a small position size. On the other hand, it has great long-term potential, as Fuelcell Energy’s deal with the US military could improve the company’s bottom line.
Fuelcell Energy has high level government relations
Working with other private companies is fine, but having ties to the US government can provide a noticeable competitive advantage. Not just one, but two different news items indicate that Fuelcell Energy has government relationships that should benefit the company and its stakeholders.
First of all, Fuelcell Energy has a kind of “government official”. I’m exaggerating a bit here, of course, but Fuelcell actually has an advisor on an important US government committee.
Specifically, the Department of Commerce has added Fuelcell Energy lead counsel Alexandrea Isaac to its Renewable Energy and Energy Efficiency Advisory Committee (REEEAC). This committee advises the US Secretary of Commerce on renewable and energy-efficient products and services.
As part of REEEAC, Isaac pledged to “advocate for US companies to be more competitive in the global energy market.” She will also advance the “understanding of the value of clean hydrogen and carbon capture,” and naturally her contribution should put Fuelcell Energy in a positive light.
Meanwhile, Fuelcell Energy is “bringing clean technology innovation to our nation’s most critical infrastructure” and supporting “the Navy’s decarbonization goals,” according to President and CEO Jason Few. How? It’s simple: Fuelcell Energy has just begun commercial operations as part of a clean energy project at the US Navy’s submarine base in Groton, Connecticut.
This project is expected to operate at approximately six megawatts in its first year of operation and add 7.4 megawatts to Fuelcell Energy’s generation operating portfolio. This undoubtedly represents a win-win scenario for the US military and for Fuelcell Energy.
Fuelcell’s revenue looks great, but profitability needs improvement
Clearly, Fuelcell Energy has advantages with its government ties. When it comes to the financial side of the equation, however, there is a “good news, bad news” scenario. The good news has to do with Fuelcell’s superior results, but the bottom line picture is less than ideal.
Here’s something for FCEL stock market bulls to celebrate. During the fourth quarter of fiscal 2022, Fuelcell Energy managed to generate $39.2 million in revenue. That’s impressive, given the economic troubles that have beset corporate America this year. Additionally, this result is almost triple the $13.9 million generated by Fuelcell Energy in the prior year quarter.
However, Fuelcell Energy has recently spent a lot of money expanding its business strategy. Throughout fiscal 2022, Jason Few noted that the company “advanced commercialization and investment of the platform, increased its engineering capabilities, and the expansion of talent and business of sales and marketing”.
Spending money on these types of upgrades came with a high cost: poor performance. Thus, Fuelcell Energy’s net loss increased from $25 million in the prior year quarter to $43.3 million in the fourth quarter of fiscal 2022. Going forward, investors should insist that the Fuelcell’s management is focused on fiscal discipline as widening net losses are not expected to continue for too long.
Is FCEL stock a buy, according to analysts?
As far as Wall Street is concerned, FCEL stock is a Hold based on five unanimous Hold ratings. Fuelcell Energy’s average price target is $3.62, implying 42% upside potential.
Conclusion: Should You Consider Fuel Cell Energy Storage?
There are risks if you’re considering investing in FCEL stocks, so don’t “load the boat” even if you’re a clean energy proponent. That being said, it is encouraging to see Fuelcell Energy working with the US Navy while having a representative on a government committee.
If Fuelcell management is willing to focus on cutting costs, it should make it easier for investors to envision a long-term future for the company. In the meantime, anyone bullish on the domestic hydrogen market should seriously consider a position in FCEL stock.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.