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UPDATE: Raymond James Downgrades Clean Energy Fuels (CLNE) to Market Perform

August 16, 2022 5:02 AM EDT
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Price: $5.38 --0%

Rating Summary:
    9 Buy, 8 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 7 | Down: 5 | New: 11
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(Updated - August 16, 2022 7:06 AM EDT)

Raymond James analyst Pavel Molchanov downgraded Clean Energy Fuels (NASDAQ: CLNE) to Market Perform from to Outperform and removed its $7 price target.

The analyst commented, "Clean Energy shares are up 45% since July 28, and up 33% year-to-date, both well ahead of the ECO, and surpassing our recently raised target price of $7. Clean Energy represents arguably the most straightforward example of how a clean tech company benefits from the Inflation Reduction Act. Let’s recall that the Alternative Fuel Tax Credit for natural gas fuels expired at year-end 2021. The bill includes AFTC extension, on a retroactive basis, through the end of 2024: meaning, all of 2022 (there will be a lump sum catch-up payment for the first half of the year), plus 2023 and 2024. Prior to July 28, our expectation had been that AFTC extension would come in the post-midterms lame duck session, via a routine tax extenders package. Getting it done before the midterms is better in the sense that it lifted the question mark more quickly, though there is nothing game-changing either way. So, what does AFTC extension mean in financial terms? The AFTC contributed $21 million of revenue (which in this case is pure profit) in 2021. We are modeling 2022 volumes up 10%, so the retroactive AFTC should contribute approximately $23 million, which equates to 71% uplift from our baseline, pre-extension EBITDA estimate of $34 million. Looking ahead to 2023, an incremental $24 million equates to 31% uplift from our baseline estimate of $78 million. Using the AFTC-boosted numbers, the stock is currently at 18x 2023E EBITDA. At the time of our tactical upgrade in May, the multiple was 8x. Clean Energy is a high-growth story, but it is a commodity business, and its profitability is always highly sensitive to policy incentives - AFTC, RINs, and California LCFS credits - so there is a limit to how lofty valuation can get. At this point, we are of the view that valuation is close to fair value - put another way, the trade ran its course."

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 $7.99 yesterday.


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Raymond James, Pavel Molchanov