Fuel cell investors got some good news today, but it’s not good enough to make the stock a buy.
FuelCell Energy (FCEL 11.55%) stock popped 9.3% through 11:10 a.m. ET Tuesday on some curious news — news that at first glance didn’t seem to have much to do with FuelCell. Over in Turkey, bus manufacturer Karsan announced plans to launch a hydrogen fuel cell bus powered by Toyota (TM -1.75%) fuel cell modules in 2025.
As H2 View reported this morning, the new bus will boast a driving range of 500 kilometers.
What this means for FuelCell
That’s good news for Toyota, I guess. And tangentially, I suppose it’s good news for FuelCell Energy as well — on the theory that Toyota’s increasing interest in hydrogen as a fuel source for vehicles helps to legitimize the fuel cell industry as a whole. But is there anything more to this story?
There may be.
Earlier this year, Toyota and FuelCell Energy jointly launched a “Tri-gen” production system in Long Beach, California, that will use FuelCell technology to produce electricity, water, and hydrogen. The partnership suggests there may be some technology sharing going on between FuelCell and Toyota. At the same time, the pilot project tells us that Toyota views FuelCell Energy as one source for the hydrogen needed to power the fuel cell vehicles that Toyota sells — primarily the Mirai light-duty fuel cell electric vehicle (FCEV), but also, potentially, hydrogen FCEVs that Karsan would produce using Toyota fuel cell technology.
Is FuelCell Energy stock a buy?
But is this Toyota-and-FuelCell partnership a good reason to buy FuelCell stock today? Even in light of the Karsan news, I don’t think it’s enough to move the needle. For one thing, Karsan buses using Toyota technology won’t be on the market for another year or more, and there’s no guarantee they’ll be a commercial success.
For another, FuelCell is an unprofitable stock with less than $120 million in net cash, and it’s burning $250 million a year in negative free cash flow. Whatever else changes, until that changes, I won’t be investing in FuelCell Energy stock.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
