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 (NASDAQ:BLDP) was up as much as 13.5%, Plug Power (NASDAQ:PLUG) jumped 12.8% early, Bloom Energy (NYSE:BE) was up 10.5%, and FuelCell Energy (NASDAQ:FCEL) 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. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.