FuelCell Energy Inc (NASDAQ: FCEL) is making its way up in the market again this morning, following up on the strong gains that we saw from the stock yesterday. However, if you’re digging for press releases or SEC filings, you’ll be hard-pressed to find anything. So, what’s the deal?
Well, there are a few things:
- The political climate change is setting the stage for growth,
- demand for fuel cell technology is climbing; and
- the technical picture is hard to ignore.
Here’s what you need to know:
Skip to What You Want to Read
- The Political Climate Change Is Great for FCEL Stock
- Demand for Fuel Cell Technology Is Flying
- The Technical Picture Suggests Strong Gains Ahead
- Risks to Consider Before Buying FCEL Stock
- Final Thoughts
The Political Climate Change Is Great for FCEL Stock
The biggest news that has broken for the clean energy industry as a whole, FuelCell Energy included, is the democrat sweep that took place during the 2020 election. Our next President will be Joe Biden, who will be joined on Capitol Hill by a democrat majority Congress and Senate.
So, what does that have to do with the clean energy industry and FCEL stock? Just about everything.
The outgoing republican leadership of the United States wasn’t necessarily a group of clean-energy proponents. In fact, the republicans dialed down environmental concerns associated with greenhouse gasses, saying that they were invalid.
Now, with Biden and the democrat party expected to take over Washington D.C., that will all change.
The democrat party, like most experts, believes that climate change is a real thing, and that human life on earth is exacerbating the process as a result of greenhouse gas emissions. So, while in office, the democrats are likely to make big changes in an attempt to, well, clean up the environment.
This is where FCEL comes in.
The company’s fuel cell products are second to none on the market. Moreover, it is working with Exxon to develop technology for capturing carbon emissions at power plants, and using them to create clean, usable energy.
That’s a great business to be in when the government is looking to push the world toward cleaner, more sustainable energy infrastructure. In fact, I believe that the Biden Administration, with the help of the democrat led Congress and Senate will make the following changes, all which are great for FCEL stock:
- Grants. Considering the need to reduce fossil fuel emissions, we’re likely to see grants coming down the line to fund research into potential solutions. With FuelCell Energy and Exxon working together to reduce emissions from power plants, the two are prime candidates for the grants that are likely to come down the line.
- Tax Breaks. FCEL is also likely to benefit from tax breaks handed down to those that operate in the clean energy industry.
- Demand. Finally, companies aren’t likely the only parties getting tax breaks. In order to spur demand, I’m expecting to see tax incentives for consumers that are tied to the use of clean energy products. This will ultimately spur demand, leading to further gains.
Demand for Fuel Cell Technology Is Flying
There’s no doubt that demand for fuel cell technology is flying. This can be seen by the relationship between FCEL and Exxon as well as two recent announcements made by FuelCell Energy’s largest competitor, Plug Power Inc (NASDAQ: PLUG).
Not only did PLUG recently pen an agreement that will result in $1.5 billion in funding and the company’s entrance into Asian markets, it also entered into an agreement with Renault surrounding the future of transportation, or the use of fuel cell technology to power vehicles.
So, we have the two leading fuel cell companies in the world working with three of the largest companies in the world to bring the technology to the masses. If that’s not a source of validation for the power of fuel cell technology and the value it will generate down the road, I don’t know what is.
The Technical Picture Suggests Strong Gains Ahead
So, there’s reason to be excited about the future of FCEL and others in the space, but what about now? In the now, the technical picture is looking great.
If you look at the five year chart for FCEL stock, you’ll notice that the current price and 10 day moving average recently broke above the 200 day moving average in a double crossover, and that’s on a five-year chart. That alone is rare.
At the same time, the 50 day moving average is coming up and likely to cross the 200 day. Should this take place, well, the crossover will be hard to ignore for technical traders.
At the same time, the stock hasn’t traded at this price since June of 2018. Considering the fact that few investors from a few years back are still holding onto the stock, there’s not much by way of resistance that will hold the price down.
What’s all this mean?
Well, it means that the stock is likely to make a dramatic run for the top relatively soon, and with no resistance, nobody knows just how far investors will let this thing fly before taking profits. That’s exciting news in the short term.
Risks to Consider Before Buying FCEL Stock
If you’re buying any stock, or investment product for that matter, you’re going to have to be willing to accept some level of risk. Even holding cash in a savings account comes with risk. When it comes to an investment in FCEL stock, the most significant risks to consider include:
- Speculation. Fuel cell technology is still in its infancy. While there are billions of investment dollars flying into the technology, it hasn’t quite been proven on a grand scale as of late. At this point, there’s no telling if it will ever take off. While I believe it will, that belief is fueled largely by speculation, which could make for a dangerous investment.
- Losses. It’s also worth mentioning that FuelCell Energy is not a profitable company. Sure, the company generates revenue, but until that revenue reaches a point where it will cover expenses and provide profits, there’s increased risk. After all, if the cash on the company’s balance sheet can’t get it to profitability, it may sell newly issued shares in an attempt to raise funds, diluting existing shareholders and resulting in significant declines.
If you read my work often, you know that I always include risk statements. In some cases, the statements are harsh and designed to make you think twice before investing. This isn’t one of those cases.
While there are risks associated with any investment you make, there are plenty of good reasons to invest in FCEL stock right now. At the end of the day, we’re about to enter into a clean energy revolution, and fuel cell technology will likely play a major role in the shift. With FuelCell Energy being one of two key players in the fuel cell technology space, it’s hard to ignore the potential that an investment in the stock provides.