by Debra Fiakas CFA
Last week I was surprised to find FuelCell Energy (FCEL: Nasdaq) on a list of companies registering a particularly bullish technical formation called an ‘Aroon’ indicator. This measure that is designed to reveal stocks entering a new, decisive trend. Shares of this fuel cell technology developer and producer had been in a steady decline through most of the year 2014, reaching a 52-week low price of $1.05 in January 2015. However, since then FCEL has regained 27% from that low point.
The turn in fortunes seemed to coincide with an announcement commemorating one year of operation at a fuel cell park operated by Dominion Power (D: NYSE) using five of FuelCell’s Direct FuelCell power plants. Dominion produces 14.9 megawatts from the installation, which is sufficient to power 15,000 homes. A heat recovery element adds to the efficiency of the plant. Then again it must be noted that several of the major small-cap indices such as the S&P 600 Index has been on the rise since about mid-January 2015. One way or the other FuelCell may have regained its ‘mojo’ in terms of its stock valuation.
Trading volumes near 3.7 million shares per day seem impressive, but this is still only 1.5% of the ‘float’ or shares outstanding and not held by insiders. Besides relatively shallow trading volume, FuelCell has been stalked by traders with a bearish view. The number of shares sold short is around 14% of the float. Based on volumes at each price level, I estimate a significant portion of the short interest was established at the $2.50 price level. If I am right in this assessment, shareholders of FCEL cannot expect a ‘short squeeze’ without further price recovery.
I do not expect to see results for the first fiscal quarter ending January 2015 until well into March. The consensus estimate is for a loss of two pennies on $48.0 million in total sales. If achieved these results would represent 8% top-line growth and a reduction in the bottom line loss by half. The company has been building sales and trimming its operating losses over the past six months or so. Any upside surprise in financial results could reinforce the new found interest in FCEL.
Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.