Why Capstone Turbine Corporation Shares Lost Steam Last Friday After Rising Through the 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: Shares of Capstone Turbine  (NASDAQ: CPST  ) continued to rally last week, even hitting their five-year high on heavy trading volumes. But it could've been another blockbuster week had the shares not cooled down on Friday and ended the week with only 5% gains.

So what: March has been a busy month for Capstone so far, with the company announcing yet another set of orders last week. The first was for one C200 turbine from the British Royal Air Force. Interestingly, the order failed to excite the market despite marking Capstone's foray into the United Kingdom.

The market's excitement built up by the middle of the week, however, after Capstone announced multiple orders for nearly four megawatts from oil and gas companies operating in the Marcellus and Utica Shale regions. Two were repeat customers, while one was new. In total, the orders comprised four C600, one C800, and ten C65 microturbines. Just the previous week Capstone had received orders for 50 C65s from oil and gas companies.

Now what: If repeat orders indicate Capstone's growing popularity, especially in the high-growth oil and gas industry, the company is also receiving recognition from the people and organizations that matter.

Last Thursday, Capstone received a certificate from the U.S. Environmental Protection Agency Combined Heat and Power (CHP) Partnership, recognizing the company's efforts in reducing carbon emissions (Click here to view the certificate). The CHP Partnership, participation in which is voluntary, seeks to promote projects that use the CHP technology to reduce green house gas emissions. The certificate can be considered great evidence of how environmentally friendly Capstone's microturbines are.

So it was actually another fruitful week for Capstone, and there was no real reason why its shares should have fallen nearly 5% on Friday. While the company's growing order book, top line, and gross margin may be attracting investors, Capstone still largely remains a trader's game, which explains the volatility in the stock.

But investors should ignore the daily stock price movements and continue to focus on the long-term growth potential of the microturbine maker. Capstone expects to break even on its operating earnings, or earnings before interest, taxes, depreciation, and amortization (EBITDA) by the next quarter; and is targeting a healthy gross margin of 35%, backed by cost control, by the next couple of years. That sounds good enough for long-haul investors to keep Capstone Turbine stock on their watchlists.

Click here to add Capstone Turbine to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Wants big profits minus the volatility? Consider 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 (4)

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 24, 2014, at 11:42 AM, drcf wrote:

    Please write something useful. You seem to be regurgitating the news or previous posts slightly modified!! it's better if you not post till you have something meaningful to write about, unless, of course, you are looking for number of posts.

  • Report this Comment On March 24, 2014, at 11:55 AM, jozie28 wrote:

    So there really is no reason why share price dropped Friday and continues on today?

  • Report this Comment On June 10, 2014, at 9:35 PM, rockinrock wrote:

    If it takes capstone another few quarters to make a profit that's a good thing.Who cares if they don't break even now?It just means they will eventually and thats a plus for the stock going forward.That means the long term prospects look good for this company.So what's wrong with that?

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: 2887083, ~/Articles/ArticleHandler.aspx, 8/31/2015 9:23:34 AM

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...

Neha Chamaria

Neha has been contributing to since 2011, including a one-year stint at the Foolish Blogging Network. She focuses on materials and industrials sectors, with special interest in fertilizers, chemicals, and heavy-equipment companies. Neha loves decoding 10Qs and 10Ks to dig out information about a company an investor would otherwise not know; and cracking the real reasons behind a stock’s move thrills her. Check back at for her articles, or follow her on Twitter

Today's Market

updated 2 days ago Sponsored by:
DOW 16,643.01 -11.76 0.00%
S&P 500 1,988.87 1.21 0.00%
NASD 4,828.33 15.62 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 3:59 PM
CPST $0.41 Up +0.04 +0.00%
Capstone Turbine C… CAPS Rating: ***