For a short time yesterday investors were excited about American Superconductor's (NASDAQ:AMSC) slowly shrinking loss. The company beat expectations and the stock popped, but what's really going on with this renewable energy company that's fallen from grace?

The numbers
In the third quarter, American Superconductor barely grew revenue to $20.9 million, despite which the company's losses continued. The bottom line loss was $15.9 million, which on an adjusted basis was $0.29, two cents ahead of estimates.

Losses keep shrinking and so does American Superconductor's chances of surviving this competitive market it's currently in. Net cash declined from $51.6 million to $39.2 million in just the last six months and with little growth there's no end in sight to the cash burn.

Even American Superconductor's own projections put the calendar fourth-quarter loss at $19 million and revenue will only grow to about $26 million.

Challenges ahead
The biggest problem is that American Superconductor's wind business, which generates most of its revenue, is stable to declining as wind companies struggle to survive around the world. The grid business is growing slowly but this is where competition is the worst.

The company is trying to get into the inverter market where Power-One (NASDAQ: PWER) is a dominant player and a far better investment. Large-scale builders that American Superconductor targets, like First Solar (NASDAQ:FSLR) and SunPower (NASDAQ:SPWR) are trying to lower costs in utility-scale projects; the pressure on every dollar spent is fierce.

With that as the backdrop it's tough to see when American Superconductor can return to profitability. I own call options that I bought on the off chance that the company would win its lawsuit in China, but that seems to be dragging out forever. I wouldn't buy here -- if anything, I would unload after yesterday's pop.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.