FuelCell Energy will release its fiscal third-quarter earnings tomorrow before the US markets open. What should you expect from the company’s quarterly earnings and what’re analysts forecasting for the share?
Green energy shares, including hydrogen fuel cells, have whipsawed this year. FuelCell shares, for instance, started the year near the $11 price level and went on to hit an all-time high of $29.44 in the first quarter. Currently, shares trade hands at $5.58 and are down 47.4% so far in the year. The drawdown from the 52-week highs looks even scary and the shares have lost 81% from their peaks.
Looking at other fuel cell shares, Plug Power and Bloom Energy have respectively lost 25% and 28.2% in the year. While the entire green energy space has looked weak in the year, FuelCell Energy has been among the worst performer. Notably, 2020 was an incredible year for green energy shares.
All the shares in the green energy ecosystem rose sharply in 2020 after Joe Biden’s election as the US president. The rally continued in 2021 after Democrats took control of the House. Among the first decisions that Biden took was to rejoin the Paris Climate Deal. He also announced that the federal fleet would be converted into zero-emission vehicles. However, the rally in these names got ahead of the fundamentals and the shares have corrected sharply from the peaks.
FuelCell Energy earnings estimates
Analysts polled by TIKR expect FuelCell Energy to report revenues of $20.6 million in the quarter that ended in July. The revenues are expected to rise 10.2% in the quarter. This was preceded by negative revenue growth in the previous two quarters. Analysts meanwhile see better days ahead for the company and are forecasting high growth rates for the next five quarters.
The company is however expected to post an EBITDA loss of $8.7 million in the quarter and is not expected to turn positive at least over the next four quarters as well. Barring one quarter in 2019, FuelCell Energy has posted negative EBITDA for the last many quarters. When green energy shares were in an uptrend, investors were willing to overlook the poor near term financials and instead focussed on the industry’s long-term growth potential amid the global pivot towards green energy. However, over the last six months, markets have been quite apprehensive of perennially loss-making companies like FuelCell Energy.
According to the forecast estimates compiled by CNN Business, FuelCell Energy has a target price of $8 which is a premium of 43.6% over current prices. Analysts are very bearish on the shares though and of the 11 analysts covering the share, seven rate them as a hold while the remaining four rate them as a sell. None of the analysts has a buy rating of the share.
Analysts have been very bearish on the shares in 2021. In June, after FuelCell’s fiscal second-quarter earnings release, B. Riley had lowered the target price from $11 to $10 while maintaining its neutral rating. Canaccord Genuity lowered the target price by $4.5 to $9 while maintaining its hold rating.
In April, Wells Fargo initiated coverage on the shares with an underweight rating and a $9 target price. Northcoast Research has also initiated coverage with a neutral rating. While there is a general consensus on the positive long-term fundamentals of FuelCell Energy shares amid the global pivot to green energy, markets have been concerned about the valuations.
According to Wells Fargo analyst Praneeth Satish, “the company should benefit in the coming years from the commercialization of a new solid oxide fuel cell product and carbon capture opportunities.” However, he added, “We struggle to see a likely scenario in which FCEL can grow into its valuation.”
Meanwhile, the valuations of all the companies in the green economy have come down sharply over the last six months amid the crash in their share prices. FuelCell Energy shares now trade at an NTM (next-12 months) price-to-sales multiple of 18.2x. The multiples went as high as 105x earlier this year amid the frenzied rally. However, the valuations are still way above what they have been historically.
All said, after the massive correction in FuelCell Energy shares, they look reasonably valued now. The company’s growth is expected to pick up in the coming quarters which should help support the share’s price action also. The earnings report might help buoy sentiments if the company can please the market with their earnings and outlook.
FuelCell Energy shares were trading almost 2% higher in US premarket price action today.
Looking to buy or trade FuelCell Energy shares now? Invest at eToro with 0% commission!
67% of retail investor accounts lose money when trading CFDs with this providerRead next
Alibaba shares drop as Chinese government seeks to break up AliPay
FuelCell Energy will release its fiscal third-quarter earnings tomorrow before the US markets open. What should you expect from the company’s quarterly earnings and what’re...