Green Energy Stocks Aren't All EV Plays
There is a revolution in green energy as you well know. The shift to less-polluting, more sustainable energy sources has been underway for decades and been gaining momentum in recent years. The momentum in green energy is being driven by both consumer demand for cleaner resources and by government policy the world over.
The most obvious example is the boom in the EV market—electric vehicles—but the EV route is not the only avenue for investors to take. Along with EV are other types of alt-fuel and green energy stocks such as the ones we will introduce today.
1. FuelCell Is About To Ignite Growth
FuelCell Energy Inc (NASDAQ:FCEL) is a company engaged in the development, manufacture, and sale of stationary natural gas and hydrogen fuel cell stations for use by industry and power grids. The company's power plants come in a variety of sizes and configurations and so can be utilized by any industry.
The problem plaguing the company today, or its share prices at least, are the lingering effects of the COVID-19 pandemic and their effect on business. The company reported a disappointing FQ1 period with revenue not only down -8.6% from last year but 33% below the analysts' consensus targets.
On a segment basis, Services and Licensing revenue fell 12%, power generation fell -10%, and Advanced Technology fell -3.0% with a -7.0% decline in total backlog. The decline in power generation revenue is a one-off event related to scheduled downtime, the decline in total backlog is the most alarming at first glance but mitigated by the company's efforts to reduce it and position itself for 2021 and beyond.
With the global economic recovery already underway we believe this company will begin to see a sustained increase in orders that will be underpinned by infrastructure spending. President and CEO Jason Few recently stated that:
“Recent weather events in Texas along with electric grid reliability challenges experienced in other locations such as California, Greece, the UK, and around the world, highlight the benefits and capabilities of our platform.
“Fuel cells provide reliability and always on power platforms, and we have a number of installations that serve as the backbone of micro-grid applications. Our fuel cells help stabilize the power grid, ensuring that electricity is available through challenging weather and natural disaster events, while avoiding costly disruptions to installations where continuous energy supply is critical to operate.”
2. Westport Fuel Systems Is Firing On All Cylinders
While FuelCell is struggling to find its momentum Westport Fuel Systems (NASDAQ:WPRT) is firing on all cylinders. The company makes alternative fuel cell technology to include natural gas and hydrogen for all manner of vehicles from passenger cars to long-haul trucks and there is a demand for its products.
The $83.9 million in revenue is up 13% from last year on strength in the OEM segment, up 32% YOY, and 20% better than the consensus target. Gains were driven by demand for the HPDI 2.0 system and those gains are expected to stick and accelerate.
Moving down, the company was able to leverage the revenue strength to good advantage with adjusted EBITDA up nearly 100% and the GAAP $0.03 in earnings $0.03 better than forecast.
The most interesting opportunity with Westport Fuel Systems is its work with the H2 ICE project. The H2 ICE (NYSE:ICE) project is working on the development of technology that will allow existing internal combustion engines to run on hydrogen.
When perfected the technology will bring hydrogen-power to mass transit at a lower cost than current fuel cell and EV technology can provide.
The technical outlook for shares of WPRT is bullish but the near term will likely remain volatile. Price action is working its way above resistance at a multi-year high that is coincident with the top of a price gap that formed in 2014.
Assuming the short-term moving average can hold up as support, we think this stock could begin moving higher before the next reporting season. A retest of the recent high is our first target but that should be easily exceeded by the end of the year on rising demand for fuel-cell and alt-fuel technology.
