Please ensure Javascript is enabled for purposes of website accessibility

Why Clean Energy Stock Popped 11% Today

By Rich Smith – Feb 12, 2020 at 6:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As oil prices go, so goes Clean Energy stock.

What happened

Shares of natural gas fleet fuel provider Clean Energy Fuels (CLNE -3.20%) stock closed 10.7% higher on Wednesday -- a rather remarkable result given that there was no company-specific news to report today. Neither did Clean Energy issue any announcements about itself, nor did a single analyst change so much as a price target about the stock.

And yet it moved.

CNG Natural Gas fuel pump fueling a car

Image source: Getty Images.

So what

Why did it move? Let's look again at that statement about analysts. No one said "boo" about Clean Energy today, but a little over a week ago, as points out, investment banker Raymond James issued a curious note warning that it seems "risky" for anyone to be shorting Clean Energy stock right now -- and matching actions to words, RJ promptly canceled its own short recommendation and upgraded Clean Energy stock to "market perform."

I see two good reasons for this. For one, Clean Energy is due to report Q4 earnings less than a month ago. Should that news be better than expected, shorts could be burned -- and right now, analysts are predicting very good news indeed, saying Clean Energy could theoretically have earned as much as $0.16 per share in Q4, a big improvement over last year's $0.01-per-share loss.  

A second reason to favor Clean Energy right now, as RJ also points out, is that there's a "close relationship between oil prices and investor sentiment on Clean Energy." Specifically, the stock tends to do well when oil prices go high, because this makes natural gas more attractive as an alternative to high oil prices.

Now what

Right now, oil prices are riding a couple-day streak of higher prices, with a barrel of West Texas intermediate crude costing 3.8% than it cost on Monday. Whether this is just a blip in a longer-term trend of declining oil prices (since January, oil prices are down 19%) or the start of a rebound is anybody's guess. Raymond James, though, is leaning toward the latter theory and predicting that by 2021, oil prices will be at seven-year highs.  

If RJ is right about that, and if Clean Energy does indeed follow the path blazed by higher oil prices, shorting Clean Energy shares could be a risky and money-losing endeavor for some time to come.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Clean Energy Fuels. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Clean Energy Fuels Stock Quote
Clean Energy Fuels
$5.74 (-3.20%) $0.19

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.