What happened
On yet another miserable day for stock markets, shares of fuel cell stocks are getting hurt harder than most on Monday. In particular, shares of Bloom Energy (BE 0.46%) are down 10.2% and FuelCell Energy (FCEL +1.06%) is seeing a 10.8% decline as of 11:45 a.m. ET. Plug Power (PLUG +11.41%), probably the best-known stock in the industry, is leading the others lower at the same time -- down 12.6%.
You can partly blame the widespread sell-off of tech stocks for this -- but you can also blame Truist.
Image source: Getty Images.
So what
In a whole series of reports on the renewable energy industry today, investment bank Truist cut price targets more or less across the board. Bloom and Plug both suffered price target cuts, to $20 and $27, respectively. FuelCell Energy avoided the axe, but the fourth major fuel cell stock, Ballard Power, did not -- and it's probably only a matter of time before FuelCell gets hit as well.
According to Truist, there's a "broad rotation out of growth equities" at work right now, explains The Fly, and this implies that growth stocks -- including all the fuel cell stocks -- are all going to be valued less highly going forward.
Now what
In Truist's view, renewable energy investors need to be aware of two things in particular. First, the analyst sees only "muted" demand for alternative energy sources from residential customers. Granted, that's an observation more relevant to investors in solar stocks -- another growth segment that Truist downgraded today. But it emphasizes the point that fuel cell investors, too, can expect to see most of their growth come from commercial customers.
The second thing is that we'll be getting insight into how those commercial sales are going pretty soon. On Feb. 8, Bloom Energy is set to report quarterly earnings, followed two weeks later by Plug Power on Feb. 23. Ballard and FuelCell will hold off their reporting until March -- March 8 and 14, respectively.
Stock market analysts don't expect any of these companies to be profitable in Q4. Of the four, Bloom is the company closest to profitability, expected to turn profitable via generally accepted accounting principles in 2023, according to data from S&P Global Market Intelligence. Then Plug Power is predicted to earn its first profit in 2024, Ballard in 2025, and FuelCell ... well, actually, no one on Wall Street seems to expect FuelCell to earn a profit before 2027.
In the absence of profits, of course, all four stocks must trade only on investor sentiment -- and as Truist just warned, sentiment is turning against them all right now. This, in a nutshell, is why fuel cell stocks are selling off today.
