What happened
Shares of Clean Energy Fuels (CLNE 2.01%) jumped as much as 25.1% in trading on Wednesday after getting a positive rating from an analyst. Shares held most of their gains throughout the day and were up 22.8% at 3 p.m. EST.
So what
Analysts at Credit Suisse initiated coverage on Clean Energy Fuels with an outperform rating and a $17 price target. That's about a 35% upside from where shares are currently trading.
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Joint ventures to unlock renewable natural gas are seen by analyst Manav Gupta as a very bullish sign for the company long-term. And with the federal government and the state of California pushing cleaner fuels, there could be huge tailwinds for Clean Energy Fuels' business.
Now what
Analyst upgrades and downgrades can often affect stocks in the short term, but they aren't what drives a stock long-term. Investors should focus on the underlying business, and in Clean Energy Fuels' case there's both opportunity and risk. The company hasn't been able to make a great business out of natural gas fuel thus far, but its transition to renewable natural gas is aimed at giving the company a new supply and a new source of subsidies given the need for clean energy credits in the U.S. That could ultimately lead Clean Energy Fuels to be a profitable renewable energy stock, but management has a lot to prove before this company is a no-brainer buy for energy investors.
