Please ensure Javascript is enabled for purposes of website accessibility

Why FuelCell Energy Stock Sold Off This Morning

By Rich Smith - May 11, 2021 at 10:28AM

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

If Plug Power is doing poorly, what does that mean for FuelCell?

What happened

Fuel cell industry bellwether Plug Power (PLUG 6.49%) issued a business update yesterday, giving investors a preview of what it expects to report when its official earnings come out next week. Today, shares of FuelCell Energy (FCEL 6.90%) stock are down 3% as of 9:40 a.m. EDT.

If you think those two events are connected, you're probably right.

Glowing red stock chart arrow trending down

Image source: Getty Images.

So what

As my colleague Scott Levine reported yesterday evening, Plug Power issued its update after close of trading Monday, and the news wasn't great. Although Plug boasted of gross billings that will be over $70 million, and up more than 60% year-over-year, actual revenue for the quarter will probably be only $67 million.

On the one hand, both those numbers appear to fall short of analysts' consensus target for $77.3 million in first-quarter revenue, reports TheFly.com -- a disappointment. On the other hand, with Plug currently running $100 million in negative revenue on its income statement, the Q1 report will apparently leave the company in a state of negative trailing revenue for another quarter -- an even bigger disappointment for investors.

Management remains optimistic, predicting gross billings will increase again, to $105 million or more in the second quarter, and revenue will rise to $102 million in that quarter, at which point Plug will be back in the black (for trailing revenue, at least). Still, even the Q2 guidance reinforces the view that Plug's gross billings -- the number it most often emphasizes in its earnings reports -- really doesn't have as close a relationship to revenue according to generally accepted accounting principles (GAAP), as investors may have assumed.

Now what

What does this mean for FuelCell, which, after all, is an entirely separate company from Plug, and which reported no negative news at all today (or yesterday, either)?

At first glance, you might not think Plug's news has anything to do with FuelCell at all, but here's the thing: Plug is currently both the strongest company in the fuel cell sector and the clear investor favorite. Although unprofitable and burning cash, Plug has more than $1.3 billion in cash in the bank, according to the latest data from S&P Global Market Intelligence, and a market capitalization well in excess of $12 billion. Compared to FuelCell -- also unprofitable and burning cash, and with a market cap of only $2.3 billion and less than $200 million in cash -- Plug's in much finer financial fettle.

But by now it's become clear that even Plug is not nearly as healthy as analysts thought it was, and investors have sold off Plug stock by 72% since January. What's bad news for Plug could be even worse news for FuelCell.

Rich Smith 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
$5.11 (6.90%) $0.33
Plug Power Inc. Stock Quote
Plug Power Inc.
PLUG
$29.54 (6.49%) $1.80

*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
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

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.