Having started the year on a high, fuel cell organization Fuelcell Energy (NASDAQ:FCEL) has lost steam in the last three months. Despite the fact that Fuelcell shares picked up nicely year-to-date in 2014, they are down in the past three months. Besides, the organization's second-quarter results aggravated matters as its shares plunged because of more extensive losses and a decline in revenue.
The organization had to bear a more extensive than-anticipated loss by virtue of higher operating expenses, which is very common for an organization that is still in its development phase. Fuelcell is focused on making its business profitable in the long run. It got new orders and awards worth 12.6 megawatts, or $80 million, in the quarter, raising its year-to-date new orders to 16.3 megawatts.
A key partnership
Fuelcell has slowly strengthened its relationship with POSCO Energy, its accomplice in Asia. The organization's new strategic initiatives incorporate working together on overall customer opportunities and coordinating its worldwide supply anchor to drive costs. Year-to-date, Fuelcell's pipeline has strengthened on the numerous projects in praiseworthy stages of closure, which will permit it to convey a strong second half.
- Warning! GuruFocus has detected 6 Warning Signs with FCEL. Click here to check it out.
- FCEL 15-Year Financial Data
- The intrinsic value of FCEL
- Peter Lynch Chart of FCEL
Fuelcell's relationship with POSCO will improve worldwide market advancement and help further diminishment in item costs. First, it is teaming up with POSCO to support multinational customers expressing interest in fuel cell projects. This allows it to support worldwide customers in neighborhood markets to ensure consistency of correspondence, quality, and execution.
Second, it is synchronizing its incorporated worldwide supply chain, which is essential in attaining the general material cost reductions being arranged. The consolidating purchase with the same supply chain will permit Fuelcell achieve volume targets that prompt lower evaluating.
The strength behind Fuelcell's business model is that POSCO is submitting the capital for the office, while Fuelcell benefits from the further acceptance of its anticipate solution by the proceeding with investment in limit and market improvement by POSCO, as well as a second source of supply. The strategic organization together of Fuelcell with POSCO is an influential differentiator in the industry. This strong partnership enables both companies to display their respective strengths as they cooperate to develop their markets, furthermore drive down costs to enhance monetary returns.
The organization is executing on key initiatives that will empower it to infiltrate the estimated $12 billion market open door in fuel cells. It would appear that its moves are picking up footing. As per Bloomberg, Fuelcell is eagerly seeking new opportunities to develop the business.
Fuelcell as of now serves two essential markets with ultra-clean stationary base burden distributed era force plants, utility lattice support and on location consolidated high temperature and power, or CHP era. Two late orders, including to a service organization and to an university, describe each of these markets in task repeatability.
The fuel cell significant as of late reported a 5.6 megawatt recompense from United Illuminating, one of Connecticut's two electric utilities for two 2.8 megawatt DFC 3000 force plants.
Separated from bringing about a noticeable improvement, diminishing the value per kilowatt will further quicken request and grow the size of the market open door for Fuelcell. Fuelcell is operating at its highest action levels, and it is growing its install base quickly. It's energetically offering on multi-site megawatt utility projects, which were impractical in the past. Additionally, Fuelcell's relationship with Fraunhofer IKTS should permit it to tap the European market.
Fuelcell has a strong accounting report, essential for a development stage organization. It is not laden with obligation and is cash-rich. Fuelcell has a cash position of $64 million while obligation is just $25 million. Also, the organization has a strong current degree of 2.08, which means that it can easily reach its obligations going ahead.
Additionally, analysts are perky with respect to the organization's prospects, anticipating that its bottom line will develop 26% this year and 64% one year from now.
Henceforth, it is clear that Fuelcell has various areas where it can tap development, and it is sponsored by strong fundamentals. Despite the fact that the organization has lost steam recently, it can keep developing on the once more of opportunities in the fuel cell market. Its venture pipeline looks strong, and its tie-up with POSCO should drive development in the long run.