Why Is FuelCell Energy (FCEL) Stock Up 10% Today?

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A global leader in fuel cell platforms, FuelCell Energy (NASDAQ:FCEL) — which focuses on hydrogen generation and power decarbonization through its technology — saw a significant rise in market value on Thursday. With the news front quiet for the company, FCEL stock likely rose in sympathy with Plug Power (NASDAQ:PLUG), a competitor in the broader hydrogen ecosystem.

According to Plug’s press release, the company completed the first customer fill of liquid green hydrogen at its Woodbine, Georgia, production plant. Notably, this achievement comes one week following the official commencement of operations at the plant. “The first delivery of our green hydrogen molecule marks a critical milestone for the green hydrogen economy,” remarked Plug CEO Andy Marsh.

Though the news obviously benefits PLUG the most, FCEL stock also rode coattails on the key event. In particular, the news brings much-needed credibility to the green hydrogen space. Per the aforementioned press release, Plug has filled such customer orders for blue chips like Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN) and Home Depot (NYSE:HD).

Further, the news comes at a particularly sensitive time for the ecosystem. As a Barron’s article mentioned, Plug incurred significant financial woes — and they might not ease soon. Several hydrogen companies shut down earlier in the year, creating downwind disruptions.

Speculators Look to a Possible Short Squeeze

Although the Barron’s article points to Plug’s various obstacles — including being stymied with a current inability to produce enough of its own hydrogen, in part due to the Georgia plant’s delay in opening — the financial situation undergirding FCEL stock isn’t especially rosy.

According to investment data aggregator Gurufocus, FuelCell suffers from five red flags. Notably, its revenue per share has declined in the past five years. Also, its Altman Z-Score sits at 0.26 below parity, indicating distress and bankruptcy possibility in the next two years. However, the many shared financial troubles also help explain the sympathy lift in FCEL stock.

Again, the sector badly needed a credibility boost. Neither FuelCell nor Plug pleased investors over the past 52 weeks. FCEL stock slipped around 67%, while PLUG lost about 74% of its market value.

However, distress in the equities space can often translate to contrarian investment activity in the post-pandemic landscape. Enticingly for speculators, the short interest of FCEL stock stands at 18.12% of its float. As well, the short interest ratio lands at just under eight days to cover. Further, the short borrow fee is modest at 0.52%, meaning that more bears could be enticed to participate.

If that wasn’t enough, Fintel’s options flow screener shows big block transactions of written (sold) call options centering around the $1.50 strike price. Since the gap between the market and strike price is “only” about 16%, FCEL stock could get interesting for gamblers.

Why It Matters

At the moment, analysts aren’t in the mood to bet on FCEL stock, rating shares a consensus hold. This assessment breaks down as four holds, one sell, and, glaringly, no buys. Coincidentally, though, the average price target lands at $1.48, almost matching the aforementioned strike price.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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