Please ensure Javascript is enabled for purposes of website accessibility

Why Alternative-Fuel Stocks Popped on Friday

By Travis Hoium – Jun 12, 2020 at 5:33PM

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

Optimism returned to the market for a while on Friday.

What happened 

It was a bounce-back day for alternative-fuel stocks on Friday, whether companies are serving the transportation or electricity markets. Ballard Power (BLDP 1.55%) was up as much as 13.5%, Plug Power (PLUG -4.15%) jumped 12.8% early, Bloom Energy (BE -2.86%) was up 10.5%, and FuelCell Energy (FCEL -1.40%) rose 26.7%. The stocks fell off later in the day, but were up 11.3%, 6.5%, 1.2%, and 7%, respectively, at the close. 

So what 

The last two days have been nothing short of crazy for each of these stocks, with shares popping, dropping, and now popping again. So why is the market so up and down on a seemingly long-term business? 

Illustration of H2 made of leaves floating above the ground.

Image source: Getty Images.

Investors are trying to reconcile multiple sentiments all at once. One is economic activity, which is ultimately what's going to drive investment in new energy products like fuel cells. Earlier this week, it seemed as if the economy was headed for a strong recovery as more states reopened. But Thursday, the market saw rising COVID-19 cases as a risk for the recovery, and states like Arizona, North Carolina, and Florida are particularly troubling. If a second wave occurs and states shut down again, the economic impact could be catastrophic. 

On Friday, we are seeing some signs that governors aren't interested in returning to restrictions that were put in place in March. So today, there's a more bullish sentiment about the economy overall, and alternative-energy products like fuel cells specifically.

Complicating matters is that energy prices in general are down this year. Natural gas, which is the most important competitor to most fuel cell companies, is down over 20% this year, and low demand likely means it won't recover soon. If fossil fuel costs are down, it makes investment in alternative fuels less attractive. 

Now what 

Alternative-energy companies are in a strange position today. Stocks have been rising this year for the most part, but financial losses are mounting and show no sign of stopping. In an economy where investment in new equipment and energy sources may be down, the market's reaction seems to miss where the industry is headed. 

BLDP Chart

BLDP data by YCharts.

I wouldn't pay too much attention to the short-term ups and downs of these stocks and would instead be keeping an eye on their long-term business trajectory. Ballard Power Systems has long been the closest to making a profit and doesn't have the debt that's weighing the others down. But even with that, the stock is high risk. 

Despite a lot of growth potential, I'm staying far away from this volatile industry until we see some more-sustainable financial results. We've seen hype in alternative-energy stocks before, so this time might be another hype cycle. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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

FuelCell Energy, Inc. Stock Quote
FuelCell Energy, Inc.
FCEL
$3.53 (-1.40%) $0.05
Plug Power Inc. Stock Quote
Plug Power Inc.
PLUG
$21.69 (-4.15%) $0.94
Ballard Power Systems Inc. Stock Quote
Ballard Power Systems Inc.
BLDP
$6.53 (1.55%) $0.10
Bloom Energy Corporation Stock Quote
Bloom Energy Corporation
BE
$20.75 (-2.86%) $0.61

*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
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

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.