Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Shares of Capstone Turbine Corporation Surged 21% Last Week

By Neha Chamaria - Mar 18, 2014 at 10:32AM

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

After a huge week, are Capstone Turbine shares headed even higher?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis. 

What: New orders seem to have become the new normal for Capstone Turbine ( CPST -2.38% ). Shares of the microturbine maker rallied as much as 21% last week, backed largely by a fresh order. But the shares had already hit their five-year high on March 11, a day before the company announced the order.

So what: The market's excitement spilled over from the first week of March when Capstone announced orders for two C800 and one C1000 turbines for installation at a couple of Southern California hospitals. That may sound like a small number at first blush, but since C800 and C1000 are built by combining the 200-kilowatt turbine, it effectively was an order for 13 C200s. Also note that the C1000 and C800 series together accounted for nearly 44% of Capstone's revenue from microturbine products for the nine months ended Dec. 31, 2013.

Last week's order was bigger both by number and in terms of the market that it caters to. Capstone received orders for 50 C65 microturbines from North American oil and gas producers operating in key plays including the Eagle Ford, Permian, San Juan, and Wattenberg.

Now what: Repeat orders from oil and gas companies show that Capstone is rapidly gaining traction in the lucrative and high-potential sector. Here are two interesting facts that you should know:

  • The oil, gas, and natural resources sector accounts for nearly 60% of Capstone's shipments.
  • Capstone's existing customer list includes some of the biggest industry names, including Chesapeake Energy, ChevronAnadarko PetroleumHess, LINN Energy, and Marathon Oil.

Clearly, Capstone Turbine is on a roll. A rapidly growing order book even pushed the company's top line and gross margin to record highs in its last quarter. If the pace continues, Capstone should break even soon.

While Capstone investors had a valid reason to celebrate last week, one order wasn't enough to justify the massive rally in the share price. That may explain why the shares ended in the red yesterday, despite Capstone announcing its first-ever order from the United Kingdom: the British Royal Air Force wants to try out a C200 turbine.

But that was yesterday, and Capstone shares are back in action this morning; it looks like the stock doesn't need to take a breather so soon.

 
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.

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

Capstone Turbine Corporation Stock Quote
Capstone Turbine Corporation
CPST
$4.92 (-2.38%) $0.12

*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 service.

Stock Advisor Returns
673%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.