UPDATE: Raymond James Downgrades Clean Energy Fuels (CLNE) to Market Perform
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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."
Shares of Clean Energy Fuels closed at $7.99 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Downgrades
Related EntitiesRaymond James, Pavel Molchanov
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