FuelCell Energy - Will This Time Be Different?

12/17/20 03:05:32 PM

by Matt Blackman

This stock has experienced numerous booms and busts. Another boom looks underway.

Security: FCEL
Position: N/A

Touted as "a global leader in delivering clean, efficient & affordable fuel cell solutions configured for the supply, recovery and storage of energy" on its website, FuelCell Energy Inc. is not new to the clean energy game. It's been trading publicly since 1992, three years longer than rival Ballard Power Systems Inc (BLDP) (see article link below).

Both companies have experienced similar stratospheric highs followed by submarine dives pulling them down to the realm of penny stocks before mounting subsequent miraculous recoveries like mythical phoenixes rising from the ashes.

As discussed in "Ballard Power - Hydrogen Fuel Poster Child", the decades-long search for hydrogen success has proven elusive. However, this time may be different than the multitude of previous false starts to turn the lightest element in the universe from speculative pipedream into a dependable and profitable clean source of power.

Figure 1. Daily chart of FuelCell Energy showing the recent breakout and retracement.

Graphic provided by: Freestockcharts.com.

Perhaps the biggest challenge is transitioning the more than 70 million tons of hydrogen produced annually, 99% of which is made by using fossil fuels to make grey hydrogen from natural gas or black hydrogen from coal, generating 830 million tons of CO2 emissions, into clean green hydrogen producing no emissions.

Another challenge is transporting H2. Compressing it requires tremendous pressure requiring heavy tanks. Liquefying it to minus 253 degrees Celsius requires tremendous energy to cool and heavy tanks to contain it. But the big difference is that governments around the world are now fully on board competing with significant financial resources to attain this goal and meet emissions reduction goals.

A more recent development spawned from the need to convert huge stores of fossil fuel reserves into clean energy is underway in the Canadian Prairies that could transform this traditionally dirty energy source to clean while leaving harmful emissions underground. A process called Hygenic Earth Energy (HEE) under development by Proton Technologies (https://proton.energy/) could at the same time convert the multi-billion problem of cleaning up hundreds of thousands of abandoned oil and gas wells into clean hydrogen at prices comparable to natural gas.

Fundamentally, the big challenge for hydrogen energy companies is profitability — none we examined have been able to sustain profits and continue to bleed money. The good news is that with the recent increasing interest and market potential, FuelCell Energy could reverse that trend, although you'd never know it from reading its financial reports that show both falling revenues and rising losses over the last few years.

Figure 2. Weekly log chart of FCEL since 2011 compared to the Electronic Components industry performance (purple).

Graphic provided by: Freestockcharts.com.

Technically, FCEL broke out of its trading range top resistance line around $3 decisively on November 16 to surge above $11.30 before gravity took over bringing it back below double digit prices in a surge also enjoyed by a number of clean tech companies surfing the Biden green energy promise wave.

What remains to be seen is how the Biden-Harris victory and revitalised clean technology hopes hold up to fiscal realities in the coming months (and years). Although FuelCell Energy is probably not a buy at these prices, the stock warrants careful watching for signs of improving financial fortunes in the rapidly changing energy landscape, especially if promises of cheaper green hydrogen prove real.

Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. Matt has earned the Chartered Market Technician (CMT) designation. Follow Matt on Twitter at www.twitter.com/RatioTrade

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FuelCell Energy - Will This Time Be Different?

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