FuelCell Energized Even After J.P. Morgan Cut to Neutral

J.P. Morgan analyst Paul Coster likes FuelCell's fundamentals but cut the stock to neutral after a sharp runup.
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FuelCell Energy  (FCEL) - Get Report shares rose Thursday even after J.P. Morgan analyst Paul Coster downgraded the clean-power producer to neutral from overweight based on valuation.

Shares of the Danbury, Conn., company recently traded at $5.21, up 2.2%. The stock surged 98% this week through Wednesday, and it’s more than doubled year to date.

"The stock is up about 135% over the last month (S&P 500 up 3.4%), buoyed initially by a wave of regional 'climate ambition' initiatives associated with hydrogen and fuel cells, but also owing to a rerating of the alternative energy stocks on the back of the Biden election victory,” Coster wrote in a commentary cited by Seeking Alpha.

But “the more dramatic move over the last three days seems to be taking place in absence of new news," he said.

The company appears to be headed for profitability in 2022, and its fundamentals “do seem good,” Coster said, according to Bloomberg. 

But FuelCell broke through Coster’s fair-value estimate. He initiated coverage Oct. 8, with a $3 share-price target and an overweight rating.

"Our neutral rating is not a call to sell the stock, which embeds significant optionality associated with carbon capture and the hydrogen economy,” Coster said, according to Seeking Alpha.

“But we prefer other names in our coverage universe at present, specifically Bloom Energy  (BE) - Get Report in the fuel cell/hydrogen space."

Last month, FuelCell "emphatically denied" allegations by short seller Night Market Research that it had lost two contract awards. 

Night Market saw a potential 70% downside for the stock, which then traded around $1.89.