The share price of FuelCell Energy, Inc. (FCEL) has dropped 52.3% over the past six months. The manufacturer of proprietary fuel cell technology platforms recently delivered better-than-expected performance Q3 results.
Let’s have a look at FuelCell’s recent financials, as what has changed in its key risk factors that investors should be aware of. (See FuelCell Energy stock charts on TipRanks)
Q3 revenue increased 43.2% year-over-year to $26.8 million, outperforming analysts’ estimates by $6.2 million.
A combination of higher service and generation gross margin and lower manufacturing variances due to increased production volumes helped FuelCell generate a gross profit of $1.1 million as compared to a gross loss of $3.1 million a year ago.
Operating expenses, on the other hand, increased to $11.7 million from $7.6 million a year ago. The combination of higher gross profit and lower interest expenses resulted in net loss decreasing to $12 million from $15.3 million a year ago.
President and CEO of FuelCell Jason Few remarked, “We have increased our investment in innovation and are making progress towards the availability of our Advanced technologies solutions, including distributed hydrogen, long-duration energy storage, and hydrogen production via our solid oxide platform.
“The global energy transition continues to accelerate, and we believe FuelCell Energy is positioned to answer these opportunities with our patented portfolio of platform solutions.”
On September 15, B. Riley Financial analyst Christopher Souther reiterated a Hold rating on the stock, and decreased his price target to $8 from $10.
Souther noted the balance sheet improvement, portfolio strategy moves, and the promise of FurlCell’s next-generation technology, but thinks the stock is valued at a premium.
Based on two Holds, and two Sells each, consensus on the Street is a Moderate Sell. However, the average FuelCell Energy price target of $7.33 implies a 21.8% potential upside for the stock.
Risk Factors
According to the new Tipranks Risk Factors tool, FuelCell’s main risk category is Finance & Corporate, accounting for 41% of the total 37 risks identified. In September, the company changed two key risk factors.
Under the Finance & Corporate risk category, FuelCell noted that its Paycheck Protection Program Promissory Note (PPP loan) may subject it to challenges associated with qualification for this loan, enforcement actions, fines, and penalties.
Under the CARES Act, FuelCell had entered into the PPP loan in April 2020. In the future, if FuelCell is found to have been ineligible for this loan, or in violation of laws and regulations that may apply, then it may be subject to fines and penalties and its reputation may also suffer.
Under the Macro & Political risk category, FuelCell highlighted that its business and operations have seen and may continue to see a negative impact from the COVID-19 pandemic.
Responding to the pandemic and associated steps have resulted in increased costs and expenses for the company. Finally, FuelCell also acknowledged that even after the pandemic subsides, it may continue to see an adverse impact on its business due to any economic recession that has occurred, or may occur.
The sector average Finance & Corporate risk factor is 51%.
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