The green energy industry is expected to grow significantly in the coming years, thanks to sustained demand for renewable energy amid rising climate concerns worldwide, technological advancements, and increasing government and corporate investments. However, input price inflation, supply chain disruptions, and broader market jitters have adversely impacted many fundamentally weak energy stocks. Green energy stocks Plug Power (PLUG) and FuelCell (FCEL) have drastically lost their values this year. Read on….
The renewable energy industry witnessed significant investor attention over the past couple of years because of rapid technological advancements and decreasing costs. Moreover, most countries worldwide are increasingly setting ambitious clean energy goals amid growing concerns about climate change and environmental injustice, making the industry’s prospects bright.
The increasing demand for clean energy across numerous market segments and supportive policies from Biden’s administration focused on fully decarbonizing the economy should boost the industry’s growth. In August, Biden signed the Inflation Reduction Act into law, which aims to provide $369 billion to fund energy and climate projects.
According to a report by Zion Market Research, global green energy revenue is expected to reach $1.95 billion by 2028, growing at an 8.5% CAGR.
However, concerns over input price inflation, supply chain disruptions, and the broad market sell-off have caused a significant pullback in many green energy stocks this year. Shares of Plug Power Inc. (PLUG) and FuelCell Energy, Inc. (FCEL) have lost significant values this year. Given their fundamental weakness and bleak growth prospects, we think these two stocks are best avoided now.
Plug Power Inc. (PLUG)
PLUG offers hydrogen fuel cell solutions for the power markets in North America and Europe. It is focused on proton exchange membrane (PEM) fuel cell technologies, green hydrogen generation, storage, and dispensing infrastructure. The company provides products such as GenDrive, GenFuel, GenCare, ProGen engines, GenSure, and GenKey.
On August 25, PLUG and Amazon (AMZN) signed a hydrogen supply deal to provide liquid green hydrogen starting in 2025 to help decarbonize AMZN’s operations as part of its commitment to be net-zero carbon by 2040. This deal is expected to help PLUG to achieve its 2025 $3 billion revenue goal. However, it might take a while to realize gains from the supply deal.
In the fiscal 2022 second quarter ended June 30, 2022, PLUG’s operating expenses increased 132% year-over-year to $114.44 million. Its operating loss widened 63.9% from the year-ago value to $146.91 million. In addition, the company’s net loss and net loss per share came in at $173.30 million and $0.30, worsening 73.9% and 66.7% year-over-year, respectively.
Analysts expect PLUG’s loss per share to widen 7.8% from the prior-year period to $0.20 for the fiscal 2022 third quarter (ended September 2022). Furthermore, the consensus loss per share estimate of $0.94 for the current year (ending December 2022) indicates a widening of 14.8% year-over-year.
The company has failed to surpass the consensus revenue estimates in three of the trailing four quarters. PLUG’s shares have declined 26% over the past six months and 27% year-to-date.
PLUG’s POWR Ratings are consistent with its bleak growth prospects. The company has an overall rating of F, which translates to Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PLUG has a grade of F for Quality and Stability. It has a D grade for Growth, Value, and Sentiment. Within the Industrial – Equipment industry, it is ranked #85 of 89 stocks. To see PLUG’s POWR Rating for Momentum, click here.
FuelCell Energy, Inc. (FCEL)
FCEL develops, manufactures, produces, constructs, and services high-temperature fuel cells for clean electric power generation. The company offers solutions for various applications, such as on-site power generation, combined heat and power, carbon capture, and hydrogen-based storage. It serves commercial enterprises, utilities, hospitals, and governments.
For the fiscal 2022 third quarter ended July 31, 2022, FCEL reported a gross loss of $4.18 million, compared to a $1.10 million gross profit in the prior year’s quarter. Its loss from operations worsened 164.5% year-over-year to $28 million. Its adjusted EBITDA loss widened 301.5% year-over-year to $20.77 million.
In addition, the company’s net loss attributable to common stockholders amounted to $30.21 million, widening 136.1% year-over-year, while its net loss per share worsened 100% from the year-ago value to $0.08.
The consensus revenue estimate of $27.87 million for the fiscal 2023 first quarter (ending January 2023) indicates a decline of 12.4% from the same period in 2021. Analysts expect FCEL’s loss per share for the same quarter to come in at $0.06. In addition, the company’s loss per share for the next year (ending October 2023) is expected to come in at $0.23.
Shares of FCEL have slumped 41.9% over the past six months and 34.4% year-to-date.
FCEL’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
FCEL has a grade of F for Sentiment, Quality, and Stability and D for Value. Within the Industrial-Equipment industry, it is ranked #83 of 89 stocks. To see FCEL’s POWR Ratings for Growth and Momentum, click here.
PLUG shares rose $0.17 (+0.81%) in premarket trading Monday. Year-to-date, PLUG has declined -25.58%, versus a -23.93% rise in the benchmark S&P 500 index during the same period.
Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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