Here we go again. Once again, Clean Energy
Since touching bottom at $12.40 on June 27, investors have thrilled to a 7% rise in stock price. Last time something like this happened, it was in response to news that Clean Energy had inked a deal to supply a UPS
Now, Westport is not Clean Energy, but there's still logic to this run-up for the latter, on good news from the former. There does seem to be some momentum behind a move to using natural gas to fuel road vehicles. Texas oilman T. Boone Pickens is a big backer of the trend and has invested in nat-gas plays such as Chesapeake Energy
Q.E.D.? "Not necessarily," reply the bears. As fellow Fool Rich Duprey pointed out last month, "GM won't have a fleet of Westport-inspired nat-gas cars hitting the roads anytime soon." A tie-up with GM might boost revenues for Westport in the short term, but any bump in business for Clean Energy will have to wait for GM to perfect the technology, build the trucks, and convince people to start buying them. Only then will there be a need for Clean Energy to supply the fuel to get 'em moving.
Problem is, while Westport's deal increases the visibility of a future for nat-gas vehicles in the long term, Clean Energy's own future looks considerably cloudier in the short term. While (barely) profitable today, Clean Energy shares sell for a pretty high multiple to trailing earnings -- 71 times, to be precise. Worse, things look likely to get worse before they get better. Analysts are predicting a decline in profits next year, boosting the stock's forward P/E up to 83.
Long story short: There still seems more downside to this stock than upside.
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Fool contributor Rich Smith owns no shares of any company named above, but The Motley Fool owns shares of UPS, and Motley Fool newsletter services have recommended buying shares of GM, Chesapeake Energy, and Westport Innovations.
We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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