FuelCell Energy Inc (FCEL) Project Bookings Are Primary Catalysts for Growth: Roth Capital

Analyst sees $800 million in contract revenue potential for FuelCell.


Analyst Craig Irwin of Roth Capital does not view FuelCell Energy Inc’s (NASDAQ:FCEL) weak fiscal third quarter as a central concern at this time. Noting that the clean energy manufacturer is currently moving towards an operating portfolio model, the analyst believes “cost-Out execution, CO2 capture progress, and material project bookings remain the primary catalysts.”

The company posted fiscal third quarter revenue of $10.4 million, falling far short of consensus and Irwin’s estimates of $16.8 million and $21.0 million, respectively. However, the strength of FuelCell’s mixed print lies in an EPS beat, with FCEL delivering $0.31 for the quarter, outperforming consensus of $0.23 as well as the analyst’s prediction of $0.20. Notably, the company is continuing to focus in on service in project revenue, which has reached $15.4 million.

Explaining how the company is generating net positive bookings, the analyst elaborates: “Product backlog was $1.6m compared to $12.9m at the end of F2Q17, remaining at multi-year lows. The ($7.0m) adjustment to product backlog reflected the move of a project from a planned direct commercial sale, to now including the plant in FCE’s company-owned generating portfolio, resulting in a net positive booking.”

While underscoring the potential revenue that the company could generate from its proposed three construction projects, Irwin also highlights the current lack of financing: “The potential sale of the LIPA projects to a third party, or available financing options remain important questions as these the projects will require over $150m combined capital for construction. The three projects are estimated to translate into $800m in contract revenue under a 20Y maintenance agreement. While there are currently no financing or PPAs for any of these projects, mgmt says they have significant market interest and we expect improved visibility when PPAs are completed in late 2017 to early 2018.”

As such, the analyst remains sidelined on the clean energy manufacturer’s prospects moving forward, reiterating a Neutral rating on FCEL with a price target of $1.50. (To watch Irwin’s track record, click here)

Tipranks analytics reveal FCEL as a Strong Buy. Out of 2 analysts polled by TipRanks (in the past 3 months), 1 is bullish, while 1 is sidelined on FuelCell stock. With a near 68% upside potential the stock’s consensus price target stands at $2.50.