Why FuelCell Energy Stock Popped 13% on Monday

It’s only thanks to the magic of stock dilution that FuelCell’s losses seemed to decline.

FuelCell Energy (FCEL 17.36%) stock roared ahead 13% through 10:35 a.m. ET Monday after the renewable energy company beat analyst forecasts for the second quarter of 2024.

Heading into the quarter, Wall Street expected FuelCell to lose $0.08 per share on $21.4 million in sales. FuelCell did lose money, but only $0.07 per share. Its sales of $22.4 million likewise exceeded expectations.

FuelCell’s Q2 earnings

Despite investors’ positive reaction, however, FuelCell’s news today was not good.

Sales for the quarter exceeded expectations, but still fell off a cliff, down 41.5% year over year. Earnings per share (which is to say, losses per share) were better than expected, and less than the $0.09 per share FuelCell lost a year ago. But operating losses increased by 15% year over year, to $41.4 million.

The only reason losses per share declined is because FuelCell sold a lot of shares to keep itself solvent. The company’s share count grew roughly 11% in size over the past year, to more than 452 million shares.

Is FuelCell stock a buy?

So why are investors buying FuelCell stock today? Because of the “earnings beat,” obviously. And perhaps also because its CEO played up FuelCell’s relationships with larger energy companies such as ExxonMobil, Ameresco, and South Korea’s Gyeonggi Green Energy, which is buying 42 fuel cell modules from FuelCell for about $160 million.

Problem is, none of these relationships seem to be profitable for FuelCell and, indeed, most analysts who follow the company don’t see FuelCell turning a profit before 2029 at the earliest. With cash levels down to $260 million, debt past $150 million, and FuelCell burning cash at the rate of nearly $20 million per month (according to data from S&P Global Market Intelligence), I expect FuelCell to have more debt than cash six months from now, and needing to sell even more shares to keep itself in business.

But, hey, thanks to the magic of stock dilution, at least that means the losses per share will go down.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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