Why Shares of FuelCell Energy Slipped 20% in the First Half of 2021

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What happened

The confetti and decorations may have been taken down after New Year’s Eve, but the party didn’t stop for investors in FuelCell Energy (NASDAQ:FCEL) for another few weeks. From the start of 2021 through Feb. 9, shares soared more than 150%.

However, investors started grabbing their jackets and heading for the exits in March. Between unfavorable opinions of the stock echoing on Wall Street and the company’s uninspiring first-quarter 2021 earnings report, the stock failed to rebound in April. Subsequently, shares ended the first half of the year down 20.3%, according to data from S&P Global Market Intelligence.

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Image source: Getty Images.

So what

Unlike fuel cell peers like Plug Power and Bloom Energy, which have successfully grown their top lines over the past few years, FuelCell Energy has struggled to grow revenue — a worrying sign that investors were reminded of when the company reported Q1 earnings in March. In the first quarter of the new year, FuelCell Energy booked revenue of $14.9 million, representing an 8.6% year-over-year decrease. Declining sales, however, weren’t the only thing in the report that troubled investors. Whereas the company reported a gross profit of $3.3 million in the first quarter of 2020, it reported a gross loss of $3.6 million in Q1 2021. Add the fact that the company’s future prospects seemed a little bleaker with the company reported a 7% decrease in its backlog from Jan. 31, 2020 to Jan. 31, 2021, and it’s clear why the earnings report failed to electrify investors’ enthusiasm.

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FCEL Chart

FCEL data by YCharts.

A flurry of analysts’ bearish opinions on the stock provided investors with more reasons to flee their positions. In early March, for example, J.P. Morgan lowered its price target to $9 from $10 while keeping an underweight rating on the stock, according to Thefly.com. One month later, Praneeth Satish, an analyst at Wells Fargo, initiated coverage on the stock with an underweight rating and a $9 price target. Then, in June, more pessimism came from Canaccord, which cut its price target to $9 from $13.50.

Now what

Shareholders who still maintain positions in FuelCell Energy aren’t finding the second half of the year to be much better; the stock has plummeted almost 20% since the start of July. For a growth company that continually struggles to grow revenue and inch closer to profitability, the stock’s fall isn’t that surprising. Consequently, investors with only significant tolerances for risk should consider going anywhere near this stock as volatility is sure to remain an issue.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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