Robust revenue growth and improved cost structure are the latest groundbreaking catalysts driving FuelCell Energy Inc (NASDAQ: FCEL) price action activity. A 90% plus stock rally after a long period of consolidation signals renewed investor interest amidst strengthening underlying fundamentals.
FuelCell Catalysts and Price Analysis
The signing of a licensing agreement with ExxonMobil is another development that continues to excite investors, pointing to a bright future when it comes to revenue generation. The confirmation that the company is nearing completion of its Tulare Bio MAT 2.8 megawatt plant and commencement of work at a U.S navy base also continues to strengthen FuelCell market sentiments.
The stock has since taken a flight after a long period of consolidation at the $0.30 level. A spike to the $0.60 level on huge turnover of traded shares, signals a change in the direction of trade. Price action activity indicates the stock is on its way to the $0.80 level, a critical resistance level.
A rally followed by a close above the $0.80 mark should open the door for bulls to steer the stock back to the $1.20 resistance level. Conversely, failure to take out the $0.80 level would leave the stock exposed to short selling pressure given the underlying bearish trend.
What Does FuelCell Do?
FuelCell designs manufacture and sells stationary fuel cell power plants used in power generation. The company offers products based on carbonate fuel cell technology. The company’s fuel cell products and systems cater to customer needs in various industries.
FuelCell price action activity has received a boost on the company announcing an 88% increase in revenues for the third quarter ended July 31, 2019, that came in at $22.7 million. Revenue growth was mostly driven by a licensing agreement that the company signed with ExxonMobil. The company also generated a significant amount of revenues from its Bridgeport Fuel Cell Project.
Operational expenses dropped 27% to $9 million as the company’s cost reduction strategies continued to bore fruits. Net loss attributed to shareholders consequently more than halved to -$8.3 million compared to -$17.6 million reported a year earlier.
“FuelCell Energy had a dynamic third quarter of 2019. The Company focused on numerous restructuring and improvement initiatives, resulting in an improved balance sheet, a leaner spending profile, and a reinvigorated team,” explained CEO Jason Few.
Strengthening Revenue Base
In addition to revenue growth and net loss reduction, FuelCell also achieved a significant milestone in the quarter that point to growth in the core business. During the quarter, the company acquired a 14.9-megawatt Bridgeport Fuel Cell project. The acquisition is poised to increase the company’s generation portfolio to 26.1 megawatts.
The new fuel cell project is poised to strengthen FuelCell revenue base as it boasts of an annual revenue base of more than $15 million. The project also delivered EBITDA margins in excess of 50%. The project also diversifies FuelCell generation portfolio transitioning it into a service-focused business.
ExxonMobil Research Deal
The company also entered into a $10 million licensing agreement with ExxonMobil Research Engineering Group. Under the terms of the agreement, FuelCell has granted EMRE access to data know-how, and equipment designs pertaining to the design, development and commercialization of fuel cells applications.
In addition to the licensing deal, FuelCell also reduced its outstanding corporate debt with Hercules in the quarter, affirming its commitment to getting rid of toxic debt. Its secured debt consequently dropped to $7.4 million from $23.8 million a year earlier.
The company exited the quarter with cash and cash equivalent amounting to $16 million up from $14.9 million as of April 30, 2019. Backlog and project awards surged to $2.1 billion compared to $1.9 billion as of the third quarter of 2018.
The tide is finally turning in favor of FuelCell Energy after a harrowing plunge in the first half of the year. The signing of a licensing agreement with ExxonMobil leading to robust revenue growth explains why the stock has bottomed out from one-year lows.
Revenue growth, as well as narrowing of net loss, underscores improved operational efficiency as the company’s core business continues to grow at an impressive rate. A combination of positive news and strong price performance suggest the stock is on the right track as a bounce-back play from one-year lows. The worst looks to be over for long-suffering FCEL shareholders.
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Disclosure: We have no position in FCEL and have not been compensated for this article.