FCEL Stock Price Rises 14% – Time to Buy FuelCell Energy Stock?

FuelCell Energy stock gained 14% yesterday and was trading higher in US premarkets today also. However, the stock is still down almost 32% this year. What’s the forecast for FCEL stock and should you buy it now?

FCEL is a US-based fuel cell company. There was a splendid rally in green energy stocks last year amid the optimism over the pivot to green energy. However, almost all green economy stocks are trading lower in 2021 as markets got apprehensive over their soaring valuations.

FuelCell stock recent developments

Yesterday, FuelCell Energy announced that it has closed a tax equity financing transaction worth $15 million with East West Bank. As part of the deal, U.S. Submarine Base in Groton, Connecticut would get 7.4 megawatts of fuel cell energy.

“We are thrilled to team up with East West Bank, partnering on this important financing solution and supporting our commercial platform deployment,” said Michael Bishop, CFO of FCEL. He added, “This efficient financing enables FuelCell Energy to retain most of this project’s long-term, recurring cash flow, and creates a structure that will facilitate additional capital opportunities that are expected to further return cash to the Company and enhance overall return on equity for this project.”

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FCEL gets financing

While the financing is only a fraction of the company’s market cap, the company sees it as a testimony to the fuel cell industry’s appeal. “We believe that this commitment further demonstrates the market’s interest in financing FuelCell Energy’s distributed sustainable energy platforms as the Company works with customers to achieve their decarbonization and enhanced grid resiliency goals,” it said in its release.

FuelCell stock forecast

Wall Street analysts are bearish on FCEL stock. Of the 11 analysts polled by CNN Business, seven rate the stock as a buy while four rate it as a hold. None of the analysts has a buy or equivalent rating on the stock.

FCEL’s median target price of $8 implies an upside of 11% over current prices. Its lowest target price is $3 which is a discount of over 58% while the highest target price of $12.20 is a premium of 69.2% over current prices. In May, B. Riley has lowered FuelCell Energy’s target price from $11 to $10 while Canaccord Genuity cut its target price from $13.50 to $9.

FuelCell Energy long term forecast

FCEL stock is a long-term play on the fuel cell industry. The Biden administration is pivoting towards green energy, unlike the Trump administration which was more favourable towards fossil fuel energy. Re-joining the Paris Climate Deal was among Biden’s first decisions after assuming office earlier this year.

Analysts expect FCEL’s revenues to rise 2.6% in the fiscal year 2021. However, they are expected to rise by 66% in the fiscal year 2022. The long-term outlook for fuel cell energy looks positive which bodes well for companies in the industry including FCEL.

FCEL stock valuation

FCEL stock trades at an NTM (next-12 months) EV-to-sales multiple of 23.5x. The stock has historically traded at low single-digit EV-to-sales multiple. However, it, with other green energy companies saw a rerating last year. FCEL’s valuation multiples peaked at 102x and have averaged 33x over the last year. While the valuations have come off their recent highs and are below the last year’s average, they are still up almost tenfold over historical averages.

FuelCell Energy technical analysis

FCEL stock is looking bearish on the charts. It is facing strong resistance at the 50-day SMA and also trades below the 100-day and 200-day SMA. In June, there was a death cross formation in the stock after its 50-day SMA fell below the 200-day SMA. While the death cross is a lagging indicator and is preceded by a downwards price action, it signals a long-term bear market. The stock has a 14-day RSI (relative strength index) of 52.3 which indicates neither overbought nor oversold positions.

While the long-term outlook for fuel cell companies looks positive, they have been out of favour with the markets. FCEL stock is looking weak both technically as well as fundamentally. However, any further dip in FCEL stock could be a good buying opportunity.

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