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FuelCell Energy (NASDAQ:FCEL) saw its shares surge with the election of President Joe Biden. After remaining essentially flat for most of 2020, FCEL stock rocketed after Biden was declared the winner of the presidential election last November. At that time, $2.39 would buy you a share of FuelCell Energy. Four months later — propelled by the prospect of massive government spending on green technology — FCEL stock was flirting with $28.
Source: Kaca Skokanova/Shutterstock
Then the bottom fell out. Since then, there have been multiple analyst downgrades, including another this week. However, FCEL stock is moving back up today.
Long-time industry watchers have seen this scenario before. The time seems right for hydrogen as a fuel, driving up FuelCell Energy shares. Then reality intrudes.
Hydrogen just isn’t quite ready for prime time. FCEL stock collapses. This pattern has been repeating since the 1990s for FuelCell Energy. However, if this is the time that hydrogen finally lives up to its potential — if investors gave up too early, looking for a quick win — then the stock is worth a closer look.
Still off its February high close by 65%, FuelCell stock is showing signs of life today.
Why FuelCell Stock Surged After November
With Joe Biden pledging to spend trillions of dollars on infrastructure and clean energy jobs, his election victory on November 7, 2020 had a huge impact on hydrogen stocks. FuelCell operates power generation plants that use an electrochemical process instead of burning of fuels. In addition, FCEL technology produces hydrogen that can be used for transportation or commercial purposes. It was swept up in the optimism.
With President Biden’s administration planning to spend trillions of dollars to make the U.S. a net zero emission country (including making U.S. electricity production carbon-free by 2035), FuelCell Energy seemed perfectly positioned to finally reap the rewards of its multi-decade investment. FCEL stock immediately began a steep climb.
The enthusiasm for companies in the hydrogen sector got a boost on Jan. 15. The Department of Energy announced $160 million in federal funding for the sector, noting the money would be allocated “to develop technologies for the production, transport, storage, and utilization of fossil-based hydrogen, with progress towards net-zero carbon emissions.”
$160 million is small potatoes, but it was seen as the start of the government funding tap opening. That news helped keep the momentum going on hydrogen stocks, including FCEL stock.
Why Some Analysts Turned on FCEL
The optimism for FuelCell began to fade. There were concerns that the Biden administration’s spending would be focused more on traditional infrastructure rather than direct spending on green energy. In other words, that the government spending tap would be quickly turned off.
In January, J.P Morgan downgraded FCEL to a “Sell.” Most recently, MarketWatch reported on Wednesday that Wells Fargo analyst Praneeth Satish had initiated coverage of FCEL stock with a “Sell” equivalent and a $9 price target. Despite opportunities in the hydrogen economy, Satish cited concerns: “the company is behind other fuel cell peers in terms of commercialization, and we struggle to see a path for [FuelCell] to grow into its current valuation.”
The Wall Street Journal polled 10 investment analysts who cover FuelCell. They have a consensus “Underweight” rating for the stock. The optimism has faded.
Bottom Line on FCEL Stock
With the election of Joe Biden, excitement was beginning to ramp up for green energy stocks. At the time, I included FuelCell in my list of “Hydrogen Stocks To Buy for the Next Generation of Travel.” An investment in FCEL stock at that point would have netted a 1,070% return if you held onto it until Feb. 9.
Unfortunately, we’ve seen what happened after the reality of the situation was recognized. The government was not going to immediately throw trillions of dollars at green energy. However, that drop does now offer the opportunity to pick up shares at a five-month low.
Should you jump on that?
FCEL stock rates a ‘B’ in Portfolio Grader. FuelCell is an established company with a long track record and development of the hydrogen economy in some form seems more likely than ever. Even if it’s not going to happen tomorrow — a realization that shook out many of the investors looking for a fast win — hydrogen is a part of the zero-emission future. It’s worth noting that even with the current bearish attitude toward the company, those WSJ analysts still see an average upside of nearly 15% for FCEL.
Maybe now is the time to start looking at FuelCell again. Given FCEL’s gains on April 22, it seems that I’m not the only one who feels that way.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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