FuelCell Energy Inc (NASDAQ: FCEL) is headed up in the market this morning, but if you’re looking for press releases or SEC filings, you’re not going to find anything. So, what’s the deal?
Well, recent profit taking has driven the stock to very appealing lows. At the same time, the political environment is ripe for growth, making the stock more appealing. Moreover, there’s quite a bit of chat on social media about hedge funds tearing the price of FCEL stock, which could spur another Wall Street Bets short squeeze.
Here’s what’s happening:
Skip to What You Want to Read
- What is FuelCell Energy?
- The Political Climate Is Great for FCEL
- A Short Squeeze May Be Coming
- What Analysts Think About FCEL Stock
- Risks to Consider Before Buying FCEL Stock
- Final Thoughts
What is FuelCell Energy?
FuelCell Energy is focused on the provision of clean, efficient, reliable, and renewable energy. The company uses hydrogen fuel cell technology to provide energy through hydrogen. Through the process, there is only one bi-product, water!
As a leader in the hydrogen fuel cell industry, the company has gained the attention of massive partnerships, the most important of which is a partnership with ExxonMobil. Through the partnership, FCEL became part of the ExxonMobil energy consortium that is working to bring clean energy to the world.
And there’s never been a better time for it.
The Political Climate Is Great for FCEL
At the moment, the political climate is changing, and in a big way. Over the past several years, republicans, a party that hasn’t been very friendly to the clean energy industry, have been in control in Washington D.C.
However, that all changed in the 2020 election season.
Not only did Joe Biden win his position as the President of the United States, the democrat party took control of Congress and the Senate, giving democrats full control over all branches of government.
So, what does that have to do with FCEL? EVERYTHING!
The democrat party, including its leader, President Joe Biden, has been very clear about their belief that the world needs to shift away from the burning of fossil fuels and into clean energy alternatives.
As a result, there are a few things that are likely to come down the line that will benefit FCEL in a big way:
- Grants. First and foremost, we’re likely to see government grants come down the line to companies that operate in the clean energy space. I’m expecting that these grants will help cover the cost of research and expanded infrastructure in order to meet demand. As a leader in hydrogen fuel cell power, FuelCell Energy is likely to become a major beneficiary of these grants.
- Tax Cuts. FCEL is also likely to benefit from tax cuts handed down to companies that operate in the clean energy industry with an aim at further supporting the research, development, and production of clean energy products.
- Tax Incentives. Finally, demand for products developed by FCEL is likely to head up as the United States government is likely to provide tax incentives to those that take advantage of clean energy products.
A Short Squeeze May Be Coming
While there are plenty of reasons to look at FCEL for the long run, it also may be a target for tremendous short-run gains. Recently, Wall Street Bets Redditors have shown the investing community just how powerful retail investors can be when they band together.
The Reddit group has been targeting heavily shorted stocks in an effort to give hedge funds a little bit of the pain that they’ve been giving retail investors.
Well, that makes FCEL a target.
The recent declines that we’ve seen on the stock have a lot to do with hedge funds taking out short positions. At the same time, there’s plenty of reasons to be excited about the stock. Mix the two together, and add in a few Wall Street Bets Redditors with something to prove, and you have the potential for yet another massive short squeeze.
What Analysts Think About FCEL Stock
At the moment, analysts aren’t big fans of FuelCell Energy. In fact, there are currently five analysts covering the stock, four of which rate it a Hold and one of which rates it a Sell.
Price targets range from $5 to $15, with a median price target of $10.25, which represents a more than 50% downside when compared to yesterday’s close.
Nonetheless, it’s important to keep in mind that the vast majority of these opinions are outdated. Furthermore, I don’t think these analysts are taking the political climate change, nor the company’s involvement with ExxonMobil into account.
Risks to Consider Before Buying FCEL Stock
Before diving into any stock, including FuelCell Energy, you should consider the risks. After all, investing comes with the risk of loss. When it comes to FCEL, some of the most pressing risks include:
- Speculation. A bet on FCEL stock at the moment is a bet that hydrogen fuel cell energy will see mass consumer adoption over the next several years. Moreover, it’s a bet that political changes will lead to environmental legislation that benefits the company. While these are likely scenarios, they are just that, scenarios. Until the future comes to pass, nobody knows what’s going to happen.
- Profitability. FuelCell Energy isn’t a profitable company. That means that the company must rely on the cash it has on its balance sheet to survive. If that’s not enough to get it to profits, it will likely look to public markets to raise funds. This will lead to dilution of existing shareholder value and potentially significant declines.
- Volatility. Finally, FCEL stock is known to experience extreme levels of volatility. While this volatility may be enjoyable on the upside, it’s painful on the downside. Moreover, it makes it difficult to time entrances and exits.
There’s no doubt that there are risks to consider before investing in FuelCell Energy. However, as we enter a world that’s focused on clean energy, with leadership in the world’s biggest economy likely to push legislation that benefits the industry, now is the time to be looking into clean energy players.
In my view, FCEL stock is one of the top on the list.
Sure, there are some issues to iron out, but we’re talking about one of the world leaders in the emerging hydrogen fuel cell market. The fact that ExxonMobil took a liking to the company is just another feather in the company’s cap, one that has more feathers than I’m willing to count.
The bottom line here is that FCEL is an innovative pioneer in the hydrogen fuel cell industry and has become a leader as a result. As the industry grows, the potential for significant returns is hard to ignore.