Why FuelCell Energy is a Screaming ShortBLDP) and Plug Power (PLUG) have yielded double-digit returns. One stock that I haven’t discussed in the sector is FuelCell Energy (FCEL). FuelCell Energy, together with its subsidiaries, designs, manufactures, sells, installs, operates, and services stationary fuel cell power plants for distributed power generation.
FuelCell Energy has been a great performed in 2016 as the stock is up close to 8% YTD in a market that has punished almost every stock. However, investors shouldn’t be excited by FuelCell Energy’s short-term gains as I think the company is poised to fail in the long-term and may even head down to $0. Hence, I think FuelCell Energy is a short at current levels, and investors should definitely avoid being on the long side of the trade.
History of failures
Like Plug Power, FuelCell Energy has a history of unprofitability. FuelCell Energy has not produced positive EBIDTA since 1997 and investors shouldn’t expect it to breakeven any time soon. Like Plug Power, FuelCell Energy has narrowed its losses over the last few years. However, I am still unsure about the company’s ability to breakeven and consider the stock a short.
I have always recommended investors to short companies that have a history of loss making and my thesis has played out correctly on majority of the occasions. Given FuelCell Energy’s history, I think investors can initiate a short position in the stock as it possesses massive downside potential.
To make matters worse, the company’s revenues are also falling. In the previous quarter, FuelCell Energy reported sales of $28.6 million, down considerably from last year’s level of $38.3 million. The company’s guidance for the company’s quarter also pointed towards a significant sales decline and as a result, I think investors should short the stock.
FuelCell Energy is a lot like its peers Plug Power and Ballard. The company has failed to meet its estimates on many occasions and has been making losses for years. Despite the recent uptick in share price, I think the stock has considerable downside potential. Hence, I think investors should short FuelCell Energy.
Published on Feb 3, 2016By Ayush Singh