Why Shares of Capstone Turbine Corporation Surged 21% Last Week

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis. 

What: New orders seem to have become the new normal for Capstone Turbine  (NASDAQ: CPST  ) . Shares of the microturbine maker rallied as much as 21% last week, backed largely by a fresh order. But the shares had already hit their five-year high on March 11, a day before the company announced the order.

So what: The market's excitement spilled over from the first week of March when Capstone announced orders for two C800 and one C1000 turbines for installation at a couple of Southern California hospitals. That may sound like a small number at first blush, but since C800 and C1000 are built by combining the 200-kilowatt turbine, it effectively was an order for 13 C200s. Also note that the C1000 and C800 series together accounted for nearly 44% of Capstone's revenue from microturbine products for the nine months ended Dec. 31, 2013.

Last week's order was bigger both by number and in terms of the market that it caters to. Capstone received orders for 50 C65 microturbines from North American oil and gas producers operating in key plays including the Eagle Ford, Permian, San Juan, and Wattenberg.

Now what: Repeat orders from oil and gas companies show that Capstone is rapidly gaining traction in the lucrative and high-potential sector. Here are two interesting facts that you should know:

  • The oil, gas, and natural resources sector accounts for nearly 60% of Capstone's shipments.
  • Capstone's existing customer list includes some of the biggest industry names, including Chesapeake Energy, ChevronAnadarko PetroleumHess, LINN Energy, and Marathon Oil.

Clearly, Capstone Turbine is on a roll. A rapidly growing order book even pushed the company's top line and gross margin to record highs in its last quarter. If the pace continues, Capstone should break even soon.

While Capstone investors had a valid reason to celebrate last week, one order wasn't enough to justify the massive rally in the share price. That may explain why the shares ended in the red yesterday, despite Capstone announcing its first-ever order from the United Kingdom: the British Royal Air Force wants to try out a C200 turbine.

But that was yesterday, and Capstone shares are back in action this morning; it looks like the stock doesn't need to take a breather so soon.

Want more profits with less volatility? Forget Capstone Turbine and try this stock
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!

 


Read/Post Comments (3) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 18, 2014, at 2:19 PM, tonyaa wrote:

    dear neha

    u forgot to mention todays order for another 4MW

    its about time u woke up to the fact that capstone is for real and worthy of a BUY rating.

    not like those mo mo fuel cell stocks that r all hype.

  • Report this Comment On March 19, 2014, at 2:31 AM, Nehams wrote:

    dear tonyaa,

    I understand you can't stand anyone who doesn't like Capstone as much as you do, but I wonder why you shouldn't be happy when someone talks positive about the company.

    The headline says last week, and that's what the post is about. I still would've mentioned the new order, had the article not already been out for publishing. You see, there's a time lag between writing and publishing, and what goes in between can't be captured.

    Thanks for reading!

    Neha

  • Report this Comment On March 20, 2014, at 10:58 AM, xinfamous wrote:

    I have been high on Capstone for over a decade. Yes, I've taken a beating. Shares came out at @$100 and it was recommended at $25. I bought at $5. Some shares I sold to pursue other more immediate earnings, but I'm sitting on what I have remaining. The tremendous potential of energy savings from off peak generation is an eventuality.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2879599, ~/Articles/ArticleHandler.aspx, 8/27/2014 3:14:13 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement