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FCEL systems, sold under the name SureSource, help maintain base load power and can run on biogas produced through wastewater treatment.
Fuel cells function by combining hydrogen with oxygen by chemical membrane to create energy using water as a waste product. Smaller fuel cells are used to drive warehouse trucks, but FCEL is not in that industry.
Fuel cell companies are constantly looking for sustainable niches for a product that seems too good to be true. The problem has always been that the most important source of hydrogen was natural gas, an unsustainable fossil fuel. FCEL claims that it has solved that problem.
The potential is great
Analysts are big on fuel cells. Lots of “hockey stick charts” are produced. These are charts that show a slowly growing industry or a company that suddenly lifts 3-5 years on the road and provides a revenue chart that looks like a hockey stick.
One of the most popular of these charts, from Grand View Research, shows the fuel cells as a market of $ 33 billion in 2027 and growing by 15.5% per year. There are several types of fuel cells. Demand is expected to be driven by the increase in unconventional power sources such as solar, wind and biogas.
That’s what FuelCell offers in Tulare, California. Gas from water treatment that was previously burned off is now being converted into energy that drives the plant. There is a power purchase agreement with the local utility to buy the rest of the force and resale agreements of 14.4 million to finance it.
Offers like Tulare are why investors are willing to play penny poker with FCEL.
The stock‘s market capitalization of $ 630 million supports subsequent earnings of approximately $ 67.6 million, and there have never been any gains. But when buyers come in, as they did on February 18, the shares make headlines.
The expectation is rapid growth. However, the company’s latest earnings release showed sales of just $ 11 million, a decrease of 38% compared to the previous year. But it arrived along with a new version that extended a new strategy called “Power House”, the former TV host Jason Few CEO.
Few worked with management consultants Huron Consulting (NASDAQ: HURN) to turn many of their loans from Orion Energy Partners into inventory and then closed a new $ 200 million lending facility with Orion. This should provide stability, as the company burned $ 40 million in cash during the fiscal year that ended in October last year.
The conclusion of the FCEL share
All this creative financing worries Investor Place’s Thomas Niel, who warn that it may limit the share’s growth opportunities.
It is not uncommon. When InvestorPlace writers look at FCEL, we usually turn a blind eye to it.
Vince Martin put an optimistic headline on a new story that nevertheless warned of previous failures. Tom Taulli reminded readers that this was a 20-cent share in June last year. He suggested that those who came in should go out now.
Will Ashworth watched FCEL in February and preferred Bloom Energy (NYSE: BE). David Moadel said that you should avoid FCEL even if you are hungry for renewable energy.
My own opinion remains what it was in January. FuelCell needs to show some big orders from tools before I think the Powerhouse strategy will work. I am willing to refrain from speculative profits in order to buy a sustainable company. I’m willing to wait for that.
Dana Blankenhorn has been a finance and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. At the time of writing, he did not own any of the companies mentioned in this story.