It's hard not to like alternative energy stocks. Especially after massive power outages, hurricanes, the sting of last year's difficult winter, and fears of a rough, stormy season ahead. These concerns and more point to the glowing possibilities for alternative energy, either as back-up power or as a means to upgrade tired infrastructure while painting it green.
On Tuesday, alternative power gained additional buzz, with the news that FuelCell Energy (Nasdaq: FCEL ) and its partner Caterpillar (NYSE: CAT ) made their first power plant sale in California. That certainly sounds like one, er, electrifying announcement.
Also encouraging is that the California districts that bought the plant are receiving $1.1 million in incentives from the California Public Utilities Commission. The thought of government funds feeding energy-efficient power generation is a tempting one indeed.
However, what makes alternative energy stocks like FuelCell Energy so darn exciting is exactly what makes them a risky prospect: the unknown. And despite great news, the unknown remains. Some insight into the potential -- and possible pitfalls -- of the alternative energy space was discussed at length in a Foolish commentary in August, and many of the same principles apply right here as well.
Not to mention, stock price spikes continue to be generated by excitement instead of solid profits. Just two weeks ago, Fuel Cell reported that its loss had grown still wider in its third quarter, at $15 million, or $0.38 a share, as compared to $13.2 million, or $0.34 a share in the same period the year before. Sales were also lower, at $7.28 million, as compared to $11.96 million. Though these numbers beat the Street's estimates, what should really light up investors' eyes would be growing profitability.
Stocks like FuelCell Power and other innovators such as Ballard Power (Nasdaq: BLDP ) and Plug Power (Nasdaq: PLUG ) have long been touted as exciting disruptive technology plays, much like the Internet was. And, of course, there's a lesson there. A lot remains to be seen in terms of which companies will be crowned "the powers that be."
So it seems a good idea to stay grounded for a while and watch for more deals like this one to materialize. And it can't hurt to kick around energetic ideas with other Fools by plugging into the Energy & Utilities message board.
You can reach Alyce Lomax at
alycelomax@yahoo.com
.
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