Shares of natural gas fleet fuel provider Clean Energy Fuels (NASDAQ:CLNE) 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.
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 TheFly.com 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.
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.