In current weeks, we’ve realized about the raw energy of social media to impact not only the largest moves on Wall Street but also to convert the investing establishment upside down. With the correct narrative, earlier out-of-favor companies, this kind of as FuelCell Vitality (NASDAQ:FCEL), can love outsized gains. But how sustainable is this kind of a dynamic for FCEL stock?
On floor amount, you may be tempted to dive in, if only for the concern of lacking out (or FOMO as the young children like to contact it). The numbers definitely discuss for themselves. In the trailing one-year interval, FCEL stock has obtained almost 1,300%, a staggering figure. And the momentum is carrying into the new calendar year, with shares up just about 124% since the January opener.
As nicely, we have seen failing companies that are on the cusp of individual bankruptcy love a reprieve due to the fact of social media. Because FCEL inventory is connected with intriguing scientific compound, its rally at minimum has some fundamental material.
Certainly, a person of FuelCell’s companies that would make a speculative shot at FCEL tempting is hydrogen storage. In accordance to the company’s web page, its “SureSource Storage alternative is a developing, marketplace-pushed vitality storage method that utilizes sound oxide electrolysis cells (SOEC) to affordably and proficiently transform surplus electrical power into hydrogen, an vitality provider, for extensive period storage purposes.”
As you know, the Biden administration has promised to push various environmentally helpful insurance policies. That bodes nicely for renewable energy businesses, together with enterprises that are tied to battery storage methods that can maintain extra vitality created by these intermittent sources.
Unfortunately, storage degradation is a drawback for batteries. Further more, batteries can not be charged/discharged absolutely for fear of hurt or degradation. Hydrogen storage has no these types of problem, theoretically creating it a far more viable remedy. However, you’ll want to stay away from the temptation of likely all-in.
FCEL Stock Wants Equally Science and Practicality
Back in late 2019, Kawasaki Significant Industries (OTCMKTS:KWHIY) built headlines when it released the world’s initial ocean-heading liquid hydrogen vessel. This was a significant signal of intent to make the most of hydrogen as a upcoming-generation fuel substitute.
It sounds promising because of the net zero emissions of hydrogen-driven transportation. When practically all of the hydrogen manufactured nowadays derives from fossil fuels, carbon seize and storage (CSS) know-how – a person of the other organizations underlining FCEL stock – could potentially mitigate emissions from the hydrogen generation system. Additional, renewable-power-sourced hydrogen could support select up the slack.
However, as S&P World wide states, this will not be an easy feat. “The Hydrogen Council thinks hydrogen can deal with 18% of international electrical power demand from customers and abate one fifth of carbon emissions. But it won’t occur cheap. Scaling up the hydrogen overall economy will choose investments of $20 billion-$25 billion each calendar year by by way of 2030, the council claims.”
In other terms, the scientific situation for FCEL inventory is undeniable. But buyers stake their capital on the expansion and profitability of an organization. And which is the place the narrative has usually been tricky for FuelCell Electrical power. As InvestorPlace contributor Muslim Farooque pointed out, the trickiness may well be catching up to the firm:
For instance, the company had entered into an exceptional licensing settlement with South Korean electrical power company Posco (NYSE:PKX) through 2023. Even so, both equally companies had a falling out and filed lawsuits against each and every other. FuelCell now designs to enter into the South Korean marketplace straight, but the Posco drama will most likely impact its name in the sector.
On the European front, FCEL has also been ineffective in successful any item gross sales. Additional importantly, even though, it seems to have lost two huge stick to-on contracts in New York, because of to exclusion from the state’s Climate Management and Neighborhood Protection Act (CLCPA). These two contracts ended up the greatest wins for FuelCell in the final several decades. They had represented a substantial portion of its operating portfolio.
Finally, the strength business is also attempting to restore three recently rescinded initiatives in Connecticut, but no matter whether it can do so stays unclear. So, the future appears very dim for FCEL inventory.
You can gamble on FCEL, no doubt. But you’d be doing so largely on emotions, not the fundamentals.
Clear Strength Not So Distinct Minimize
Apparently, the S&P International report produced an intriguing parting issue concerning hydrogen-similar infrastructural integration. “Customers also have a position to play. Are they keen to absorb higher fees from new carbon seize and storage (CCS) tasks, or to assist pay for rising electrolyzer technologies to decarbonize electrical power use?”
I would propose the reply is no, at minimum not for the duration of this pandemic and economic downturn. If you search at original jobless claims in the U.S., they remain constantly elevated. Additional, the private preserving charge moved bigger in December 2020, which is an sign of client anxiety. If they weren’t concerned about society, they’d be paying income, not preserving it.
Total, the U.S. business enterprise sector has finished a terrific position responding to the pandemic, however the financial state is even now reeling. Hence, the pain all over the globe is most likely on the similar degree as the U.S., if not noticeably worse. So I never think that buyers are willing to pay out for thoroughly clean electricity just for the sake of helping the surroundings.
This adds more pressure to the upside narrative of FCEL stock. While I wouldn’t dare limited it, I consider stakeholders who are previously deeply successful must take into account having some off the desk. We’ve previously witnessed how even the most emotional of social media trades can not increase indefinitely.
On the date of publication, Josh Enomoto did not have (both directly or indirectly) any positions in the securities outlined in this report.
A former senior enterprise analyst for Sony Electronics, Josh Enomoto has aided broker significant contracts with Fortune Worldwide 500 corporations. Over the previous numerous years, he has delivered one of a kind, significant insights for the investment decision marketplaces, as very well as a variety of other industries which include legal, construction management, and healthcare.