Roth Capital Sees Significant Upside in FuelCell Energy (FCEL); Initiates Coverage at 'Buy'

Roth Capital initiated coverage on FuelCell Energy (NASDAQ: FCEL) with a Buy rating and a price target of $12. Analyst Craig Irwin said he is positive on the stock ahead of significant project catalysts that are expected to materialize over the next couple quarters.

"We see FCE as a premiere provider of clean distributed generation solutions, where we believe management is well-positioned to execute on its $2bn pipeline with utility and industrial power customers. Recent progress lowering manufacturing costs has greatly exceeded DOE benchmarks, bringing FCE's products closer to market-clearing prices, including a benefit from the ITC, but not requiring other outside funding," said Irwin.

"The 2009 DOE gap analysis estimated a 2020 cost reduction of 30% primarily on improvements to stack life and power density, lower natural gas cleanup costs, and lower costs for balance of plant, conditioning and installation. The partnership with POSCO also helped pull forward demand, contributing significantly to FY15 demand, where production of 65MW was close to the 70MW volume assumption in DOE's targets. We expect continued progress from POSCO, helping push down BOP costs from additive volumes, and FCE's approach market clearing prices," added the analyst.

Discussing catalysts, Irwin said, "The 63MW Beacon Falls project is the most significant opportunity FuelCell Energy has ever pursued, with around $500 million in associated revenue, and we note this project has already received approvals from the Connecticut Siting Council. While the revenue from this project is likely already in consensus estimates, we believe that in this current environment of elevated investor skepticism, the final awards in late-April and late-July should serve as a material valuation catalyst. Additionally, the bid process with the Long Island Power Authority (LIPA) to supply 40MW in fuel cells is ongoing, with official submissions due in June 2016, and initial project implementation expected during 2017."

For an analyst ratings summary and ratings history on FuelCell Energy click here. For more ratings news on FuelCell Energy click here.

Shares of FuelCell Energy closed at $6.45 yesterday.

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