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FuelCell Initiated Overweight on Profit Potential; Shares Up

FuelCell is set to “pivot into profitability,” a J.P Morgan analyst said, initiating coverage of the fuel-cell-project company at overweight.
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FuelCell Energy  (FCEL) - Get FuelCell Energy, Inc. Report shares rose on Thursday after J.P. Morgan analyst Paul Coster began coverage of the stock with an overweight rating and $3 price target.

The fuel-cell-project company is set to “pivot into profitability,” he wrote in a commentary cited by Bloomberg.

FuelCell shares recently traded at $2.43, up 12%. They have eased 7% year to date.

The pivot should happen as FuelCell converts project inventory into recurring revenue, Coster said. 

“With over $1.3 billion of firm backlog in hand and nearly 50 megawatts of projects, the company is pursuing a market pegged at over $170 billion and with more than 20 gigawatts of capacity,” he said.

This should generate buoyant long-term growth for the company after years of investment and going through cash, he said.

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“The market opportunity is early-stage but massive,” Coster said. He noted the increasing popularity of clean and sustainable energy.

He’s excited about “major projects” with ExxonMobil  (XOM) - Get Exxon Mobil Corporation Report and Toyota.  (TM) - Get Toyota Motor Corp. Sponsored ADR Report The debut of a solid oxide fuel cell and electrolyzer solutions geared toward hydrogen also should help, he said.

Earlier this week, FuelCell said it "emphatically denies" allegations made by a short seller that it had lost two contract awards.

FuelCell Energy shares tumbled Monday after Night Market Research said it saw a potential 70% downside and claimed the company may have lost two of its largest generation-contract awards.

"We see no evidence of this being disclosed to investors by FuelCell," Night Market Research said. "Instead management has represented that the awards are nearing power purchase agreements."

In a statement, FuelCell Energy said it had become aware of claims made by an apparent short seller "that are misleading and contain factual inaccuracies."