Clean Energy Fuels (CLNE) Run Up a Shorting Chance - Raymond James

December 26, 2013 10:27 AM EST
Get Alerts CLNE Hot Sheet
Price: $2.68 +0.37%

Rating Summary:
    5 Buy, 9 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 24 | Down: 17 | New: 14
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Raymond James analyst Pavel Molchanov is not convinced about the recent 10% move up in Clean Energy Fuels (NASDAQ: CLNE). In fact, he sees the move as a shorting opportunity.

The upside, he said, comes amid recent strength in oil prices on what the analyst calls largely temporary effects like South Sudan newsflow and U.S. year-end ad valorem taxes. Meanwhile, U.S. natural gas prices - the feedstock for Clean Energy's product - is also at multi-year highs due to cold weather.

Despite the near-term commodity volatility, the analyst sees Clean Energy Fuels as a "relative short" for the next 12 months.

Molchanov describes the company as a "pure commodity business" with little value add and a high cost structure. The business has low barriers to entry and the company's retail fuel margins may be pressured over time, from the current level of $0.30-0.35/gal towards traditional fuel margins of $0.15-0.20/gal. The analyst also sees balance sheet leverage getting close to the "danger zone." While EBITDA is expected to turn positive in 2014, at just $12 million it would cover less than a third of the $38 million total interest expense the firm expects.

The firm maintained an Underperform rating.

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

Shares of Clean Energy Fuels closed at $13.44 yesterday.

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Raymond James, Pavel Molchanov

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