FuelCell (NASDAQ:FCEL) is charged up. FCEL stock has soared more than 500% over the past year.
To put that in perspective, for anyone that bought during the March 2020 crash, FCEL stock is now up from a low of just $1 to $18 now. That’s incredible.
Yet, even after a dazzling run, shares have still had a poor long-term trajectory. An investor that bought FuelCell’s shares five years ago has still lost more than half of their money.
That speaks to the difficulty that FuelCell has had in commercializing its technologies. Admittedly it can take awhile to get new green energy companies off the ground.
In any case, even after a big run in the stock price, FuelCell’s operating business continues to face substantial challenges.
A Struggling Company
FuelCell has been in business for a long time. A very long time. In fact, in a recent disclosure with the Securities and Exchange Commission (SEC), FuelCell noted that:
“We have not been profitable since our year ended October 31, 1997. We expect to continue to incur net losses and generate negative cash flows until we can produce sufficient revenues and margins to cover our costs. We may never become profitable.”
FuelCell is coming up on a quarter-century of running without generating profits. It’s one thing to struggle for a few years, but at some point, you have to wonder if the business plan or technology is fundamentally flawed.
The company’s latest quarterly results, which FuelCell released last week, add to that point. The company lost 8 cents per share, which was double what analysts expected. Revenues grew nicely for the quarter but were more muted year-over-year.
For full-year 2020, FuelCell generated $71 million of sales versus $61 million for 2019. That’s not the sort of hypergrowth you associate with a stock that’s up hundreds of percent.
Making matters worse, the company’s income statement didn’t materially improve either, even with the rise in revenues. While its loss from operations decreased considerably, FuelCell’s overall net loss increased from $78 million to $89 million, and its backlog actually decreased by 2.5% to $1.29 billion.
With bookings not moving up, and the company’s operating results full of red — as they’ve been each year since 1998 — it’s hard to make a business-related case for FCEL stock here.
FCEL Stock: Poor Fundamentals, but Fantastic Sentiment
So why are shares up so much if FuelCell’s business is muddling along as per usual? The answer is that green energy stocks are positively booming.
Elon Musk has ridden Tesla (NASDAQ:TSLA) stock to become the world’s richest person. Tesla rivals such as Nio (NYSE:NIO) are going stratospheric. And we’ve seen a host of special purpose acquisition vehicles (SPACs) all become overnight successes in the electric vehicle (EV) and green energy space.
As if that weren’t enough, the U.S. inaugurated President Biden recently. He’s likely to spend more money on clean energy initiatives. For a sector that was already on an exponential rally, this added even more fuel to the fire. FuelCell’s closest peer, Plug Power (NASDAQ:PLUG) stock has soared from the single digits to more than $60 over the past year as well.
Against all that backdrop, you can get why people are piling into FCEL stock. With the whole sector on fire, even chronic underachievers like FuelCell are going to get a second look.
Here’s where FuelCell’s long track record hurts it though. Many of these new SPAC clean energy companies haven’t launched products to market yet. They still have the benefit of the doubt — it will be a few years before we see whether they have strong commercial prospects or not.
FuelCell, by contrast, has been floundering for a long time. From the numbers released just last week, we see it continues to run sizeable losses and isn’t showing any significant momentum on the top-line or in building backlog going forward.
FCEL Stock Verdict
FuelCell has staved off bankruptcy and is now well-funded for future plans. That’s a big positive, there’s no denying that.
But there’s still little going on with the underlying business that would justify this much of a run in the stock price. FCEL stock appears to be riding the coattails of stronger firms such as Tesla.
Until FuelCell starts to generate strongly improving revenues and profits of its own, investors should view FCEL stock with skepticism.
Maybe you can make a case for owning a bit of FCEL stock as part of a broader bet on the green energy industry as a whole. However, when all is said and done, not all the companies here are going to end up being winners.
If you’re picking individual green energy stocks to hold for the long-term, FuelCell doesn’t look like one of the better options.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.