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Why Shares of FuelCell Energy Plummeted 15% in March

By Scott Levine - Apr 7, 2021 at 9:00PM

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It wasn't only the fuel cell company's failure to meet Q1 2021 revenue and earnings expectations that shook investors' resolve last month.

What happened

Skyrocketing 86% in January, shares of FuelCell Energy (FCEL -5.49%) have subsequently come down to earth over the past two months. In February, FuelCell Energy's stock dropped 18%, and it slid even more, about 15%, in March, according to data provided by S&P Global Market Intelligence.

Besides the company's disappointing first-quarter 2021 earnings report, a Wall Street analyst's bearish take on the stock moved investors to pare their positions.

Sitting at table with money on it, a boy holds a down trending red arrow.

Image source: Getty Images.

So what

Failing to meet analysts' revenue estimate of $22.1 million and earnings estimate of negative $0.04 per share, FuelCell Energy reported Q1 2021 sales of $14.9 million and a loss per share of $0.15. But there was much more that investors found unpleasing about the company's quarterly performance.

The greater concern came from its inability to grow its backlog -- a precarious sign for a growth company like FuelCell Energy. As of Jan. 31, 2021, FuelCell Energy reported that it had a backlog of $1.27 billion -- nearly $94 million lower than at the same time last year. Moreover, the company's inability to grow its backlog has been apparent for some time now. In the third and fourth quarters of 2020, for example, FuelCell Energy had reported backlogs of $1.33 billion and $1.29 billion, respectively. Juxtaposed with the spate of announcements addressing deals that the company's peers have inked over the past year, FuelCell Energy's inability to grow its backlog was surely interpreted as a red flag for investors.

FCEL Chart

FCEL data by YCharts

Besides the company's financials, a pessimistic outlook on the stock from JPMorgan moved investors to act. On March 3, Paul Coster, an analyst at JPMorgan, lowered his price target to $9 from $10 while keeping an underweight rating on the stock, according to The Fly. The analyst's lowering of his price target was especially notable since it marked a turnaround in Wall Street's sentiment regarding the stock. Before Coster lowered his price target, the last action on the stock came in late January when Canaccord raised its price target to $15 from $8.50.

Now what

The decline in FuelCell Energy's stock is hardly a surprise considering how charged up investors' excitement has been over the past year. For a growth company that has consistently failed to generate a profit or positive cash flow, FuelCell Energy's lackluster 2020 earnings seemed to be a breaking point for investors' patience. Falling more than 11% in April, the stock shows little sign of ending its slide -- and it wouldn't be surprising if the slide extends for the foreseeable future. For growth-oriented investors, there are certainly more compelling stocks that represent significantly lower degrees of risk.

Scott Levine 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.

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