Should I sell FuelCell Energy shares after Q2 results?

FuelCell Energy (NASDAQ: FCEL) shares remain under pressure after the company reported worse-than-expected second-quarter results.

Second-quarter revenues reached roughly half of analyst expectations, while the net loss for the same period totaled $30.1 million.

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Second-quarter revenues missed expectations

FuelCell Energy is one of the biggest publicly traded fuel-cell manufacturers in the U.S. that provides clean energy in over 50 locations worldwide. FuelCell Energy has technology that is alternative to traditional combustion-based power generation and complementary to intermittent energy sources, such as solar and wind turbines.

FuelCell Energy reported worse than expected second-quarter results last Thursday; total revenue has increased by 17.4% Y/Y to $16.38 million, while the non- GAAP earnings per share were -$0.08 (missed by $0.03).

Second-quarter revenues reached roughly half of analyst expectations, while the net loss for the same period totaled $30.1 million. Adjusted EBITDA for the second quarter was -$21.2 million compared with -$11.3 million a year ago.

Operating expenses jumped to $20.9 million from $12.6 million in the second quarter of the 2021 fiscal year. The company’s management said that it is not happy with the quarter’s profit performance and will take action to improve this. Mike Bishop, Chief Financial Officer of FuelCell Energy, said:

The increase in gross loss was driven by higher manufacturing variances, 4.8 million of non-recoverable costs related to the construction of the Toyota project, and lower Advanced Technologies margin partially offset by reduced Generation gross loss, excluding the impact of the non-recoverable costs related to the construction of Toyota project and reduced Service gross loss.

FuelCell Energy is still not profitable on a fiscal year basis, the book value per share is around $1.8, and there are better long-term investment opportunities at the moment.

The company would probably not deliver a turnaround in its financial performance for the second half of fiscal 2022, and if the U.S. stock market enters a more significant correction phase, the share price could be at even lower levels.

Bears control the price

FuelCell Energy shares have weakened more than 50% since March 11, 2022, and according to technical analysis, the bears remain in control of the price action. Falling below $3 supports the continuation of the negative trend, and the next price target could be at $2.5.

On the other side, if the price jumps above $5, it would signal to trade FuelCell Energy shares, and we have the open way to $6.

Summary

FuelCell Energy reported worse-than-expected second-quarter results last Thursday, and total revenues reached roughly half of analyst expectations. FuelCell Energy shares have weakened more than 50% since March 11, 2022, and according to technical analysis, the bears remain in control of the price action.

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