Making Sense of Fuelcell Energy’s Newly Added Risk Factors

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Connecticut-based Fuelcell Energy (FCEL) provides fuel cell power technologies. It provides sustainable products and solutions for businesses, utilities, governments, and municipalities.

Fuelcell’s earnings report shows revenue declined 18% year-over-year to $13.9 million in Fiscal Q4 2021 ended October 31, falling short of the consensus estimate of $21.9 million. It posted a loss per share of $0.07, which improved modestly from $0.08 loss per share in the same period last year but missed the consensus estimate of a $0.04 loss per share. The company ended Q4 with $460.2 million in cash.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Fuelcell Energy.

Risk Factors 

According to the new TipRanks Risk Factors tool, Fuelcell Energy’s main risk category is Finance and Corporate, representing 43% of the total 37 risks identified for the stock. Production and Ability to Sell are the next two major risk categories, each accounting for 14% of the total risks. Fuelcell has recently updated its profile with two new risk factors.

The company informs investors that some of the projects it undertakes are funded with debt. Therefore, rising interest rates may increase the cost of debt. Additionally, Fuelcell says that it raises capital from tax equity investors. It explains that those investors derive a large portion of their returns through tax benefits. Fuelcell says that its ability to obtain financing from this group of investors will depend on the availability of tax benefits. Therefore, the company cautions that a rise in interest rates or unfavorable changes in tax policy may limit its ability to obtain the capital needed to fund projects, which would adversely affect its business and financial condition.

Fuelcell tells investors that it plans to grow its international business. It mentions increasing sales in the South Korean and European markets. But it cautions that the international expansion efforts may face challenges, citing forex rate fluctuations and regulatory burdens related to tax, exports, and the repatriation of earnings.

The Finance and Corporate risk factor’s sector average is 40% versus Fuelcell’s 43%. Fuelcell’s stock has declined about 52% year-to-date.

Analysts’ Take

Following Fuelcell’s Q4 report, Cowen & Co. analyst Jeffrey Osborne reiterated a Hold rating on Fuelcell stock but lowered the price target to $5 from $7. Osborne’s reduced price target suggests 6.19% downside potential. The analyst noted that Fuelcell’s Q4 results were disappointing.

Consensus among analysts is a Hold based on 5 Holds. The average Fuelcell Energy price target of $5.30 implies that the stock is fully valued at current levels.

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