Why FuelCell Energy Is On Track for Impressive Growth in the Long Run

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Oct 24, 2014

FuelCell Energy (FCEL, Financial) is one of the leading companies in designing, manufacturing and facilitating services for ultra-clean, efficient and reliable fuel cell power plants. Let us look at the potential growth drivers that could accelerate its revenue in the second half of the year.

Strong prospects

FuelCell looks solid to accelerate its margins this quarter as it is practicing various growth initiatives that could assist the company in reducing its operating as well as manufacturing costs and boost its growth in the coming years. FuelCell is strategically reducing the levelized cost of energy or LCOE that should help the company to remain competitive by providing affordable, clean and secure power and thermal solutions to its customers worldwide. Further the company is also reducing price per kilowatt that will increase demand for its competitive offerings, yielding more projects for its energy solutions.

In addition, the company is integrating its global supply chain as it strengthens its relationship with POSCO Energy, one of its partners in Asia that should not only widen its opportunity to acquire new customers in the global market but also assist in cutting down its costs. Besides, the company is also strategically involved in transforming its static power plant solutions to commercially viable solutions to effectively serve the two of its primary markets such as ultra-clean stationary base load distributed generation power plants and on-site combined heat and power, or CHP generation that should boost its revenue going forward.

Strong outlook

FuelCell expects robust growth in both of these segments as it is receiving strong orders. The company has orders and awards of 12.6 megawatts that have raised its new orders to 16.3 megawatts since the beginning of the year. FuelCell currently sees $12 billion market opportunity in the energy markets, which is of course a small portion of the multi-trillion-dollar energy market around the world. However, the company has a strong fundamental business model in place that will help the company take away a handsome portion from this enormous opportunity worldwide. FuelCell has potential sales pipelines comprising multiple projects that are currently at the final stage of completion that should enhance its results in the coming years.

Moreover, FuelCell has been recently awarded the second-largest fuel cell power plant of 5.6 MW of United Illuminating to be installed. The company has also begged a 1.4 MW fuel cell plant project for the University of Bridgeport for its clean on-site combined heat and power or CHP generation. FuelCell has additionally acquired a project from a utility company. The company will operate these plants for UI under 20-year service agreements. FuelCell has also acquired a 1.4 megawatts fuel cell power plant for the University of California, Irvine Medical Center to provide both the electricity and usable high quality heat to the University. Besides, the company anticipates strong growth in Asia and Europe where the governments are initiating various measures to opt for clean energy.

Furthermore, the company is also investing heavily in research and development capacity with the strategic relationship with Fraunhofer to enhance its performance for DFC FuelCell and to increase its power output to efficiently provide the Fuel plant technology at an affordable rate that should increase its adoption rate in the clean energy market. FuelCell has also broadened its relationship with NRG Energy (NRG, Financial). NRG Energy will invest approximately a $35.0 million in the FuelCell Energy stocks and offer a new financial facility of about $40.0 million that should assist the company in developing the projects.

Conclusion

All in all, FuelCell is poised to grow tremendously in the future as it is strengthening its business for the long-run and enhancing its capabilities with value proposition through various strategic initiatives that will certainly help the company lower its costs and maximize its margins. Also, analysts have estimated CAGR of 40.00%, which is higher than industry average CAGR of 28.78% for the next five years indicate potential growth for the stock. Moreover, the stock is cheaper than the First Solar (FSLR, Financial) and Sun Power (SPWR, Financial) and investors looking for including the solar stocks to their portfolio can certainly pick the FuelCell and maximize their returns.