FCEL) have waited over a decade for good news. All they got in Q2 was another $15 million loss to add to their $1.1 billion accumulated deficit. Shares dropped -18%.” data-reactid=”12″>Investors in FuelCell Energy (NASDAQ:FCEL) have waited over a decade for good news. All they got in Q2 was another $15 million loss to add to their $1.1 billion accumulated deficit. Shares dropped -18%.
Source: Kaca Skokanova/Shutterstock
Please. I’m asking. It’s time to stop throwing good money at bad stocks.
$1.5 billion valuation as investors from Enron to the U.S. Navy rushed to the clean-energy company.
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But those days are long gone. Today, FuelCell stares down the barrel of bankruptcy while its former competitors shine. It’s time for the last stakeholders to throw in the towel before the stock hits $0.
FCEL Stock: Gambling on a Turnaround
narrowed to five. Though that hasn’t stopped fans of the Blackberry eyeing a 2021 revival.
But would you bet all your money on a Blackberry comeback? Probably not. And neither should you with FuelCell.
underperform by negative -16.1% per year.
“Hope”: The Most Dangerous Word in Investing
seek self-confirming evidence. Others are swayed by “anchoring bias,” and assume FCEL’s peak price of $7,000 makes its current $2.26 value look cheap.
But don’t be fooled. FuelCell today isn’t the FuelCell of 2001.
In Q2, the company generated just $7.1 million of service and license revenues and $4.7 million of power generation revenues. As for product revenues? Zero, according to SEC filings.
stopped buying kits in 2016. Its 3% royalty agreement has been stuck in arbitration ever since. That’s not a sign you want from a critical relationship. NRG Energy, another major investor, allowed its $40 million revolving credit line to expire in 2019.
Bloomberg wrote last year, “all but crushed by the economics of solar and wind power and outgunned by rivals including Bloom Energy Corp. that offer more flexible and less bulky systems.”
How did FCEL Fail?
The company never fully recovered from a “death spiral” that started in 2004. That year, FuelCell lost a record $86 million after failing to replace its 2002 contracts with new major projects. Its finances would never look quite the same.
As its cash position weakened, its Altman-Z score, a measure of solvency, plummeted to 0.44. (Any score below 1.8 foreshadows an upcoming bankruptcy).
The financial stress meant that FCEL had to divert resources to shoring up its balance sheets rather than on R&D or marketing. R&D spending declined from 83% of revenues in 2004 to just 6% in 2019.
$3.6 million, more than double what they did in 2011.
Can FCEL Stock Make a Comeback?
135 of its 450 staff last year, but still bled $61 million of cash.
XOM) unlimited, perpetual rights to its SureSource Capture for just $10 million. The two companies later amended the deal to include $45 million in FCEL R&D spending, and a path for FCEL to license back its technology.” data-reactid=”54″>These issues have forced FCEL to sell their intellectual property (IP) on the cheap. In June 2019, the company gave ExxonMobil (NYSE:XOM) unlimited, perpetual rights to its SureSource Capture for just $10 million. The two companies later amended the deal to include $45 million in FCEL R&D spending, and a path for FCEL to license back its technology.
jumped from 13 cents to $2.00 on hopes the Exxon deal would create a significant technological breakthrough. And one could still appear.” data-reactid=”59″>Perhaps this is a blessing in disguise. FCEL stock jumped from 13 cents to $2.00 on hopes the Exxon deal would create a significant technological breakthrough. And one could still appear.
less than 3% of the micro-cap company.
FCEL Stock Probably Worth $0
As much as I like growth industries, not every company will survive. Even startups with original ideas and excellent management can still run into issues along the way.
FuelCell, on the other hand, hasn’t seen a blowout success in almost two decades. Its investors and backers have dropped out one by one, as FCEL technology failed to prove itself.
Hopeful investors could keep throwing money at FCEL stock. Its big breakthrough product could be around the corner. But realistically, it’s a longshot. Unless FCEL manages to discover a market-beating product soon, shares are heading straight back to $0.
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