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Will FuelCell Energy Inc (NASDAQ: FCEL) And Ballard Power Systems Inc (NASDAQ: BLDP) Close The Gap With Plug Power Inc (NASDAQ: PLUG)?

Will FuelCell Energy Inc (NASDAQ: FCEL) And Ballard Power Systems Inc (NASDAQ: BLDP) Close The Gap With Plug Power Inc (NASDAQ: PLUG)?
Written by
Jarrod Wesson
Published on
April 12, 2017
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Did you make some money after we wrote about PLUG? Do you want to hear a similar story? Read the following article carefully.The two competitors of Plug Power Inc. (NASDAQ: PLUG), FuelCell Energy Inc. (NASDAQ: FCEL), and Ballard Power Systems Inc. (NASDAQ: BLDP), saw dramatic increase in their stock price after Plug signed its agreement with Amazon. Both develop the same technology that PLUG will provide to Amazon. Thus, we would expect that the companies may commence to work for other big players as Plug Power just did. If this happens, we expect the companies' share to increase a lot more than they already have. Take a look at the the three companies' stocks and note that PLUG's share price increased much more than that of others:SourceAre the other competitors preparing agreements with other partners?Yes, this is happening. Ballard, for example, signed with Toyota Tsusho a distribution agreement for Fuel Cell products in Japan. In an interview that we could find on this website, the CEO of Ballard, Randy MacEwen, celebrated the agreement stating that the agreement represents an exciting development for Ballard as well as important progress in the execution of our strategy in Japan. We could read in the same article that Shinzo Abe, Japan's Prime Minister, said that hydrogen is the 'energy of the future' and his government plans to invest more than $100 million on development of hydrogen infrastructure. If this information is true, we expect the company to increase its top line a lot thanks to this distribution agreement.FuelCell Energy has announced many other agreements with relevant institutions willing to use the technology. On April 5, 2017, for example, the company announced a Grid Resiliency Project with Long Island. Here are some of details that were included in the press release:

"The execution of a power purchase agreement (PPA) with PSEG Long Island to supply an existing electrical substation with the electricity generated by a SureSource 1500™ fuel cell plant. This project is part of the Clean Renewable Energy Feed-In Tariff II program. The fuel cell plant will be located at an industrial operation on Long Island, New York that will utilize the high grade heat for their production process, reducing both their operating costs and their emissions" Source

The agreement will be very beneficial for the city. The emission of 3,300 tons of CO₂ will be avoided and it will help reduce NOx emissions by five tons per year as well as the SOx emissions.In another press release of March 21, 2017, FuelCell Energy communicated about a new agreement with Korean-based POSCO Energy. According this new contract, the Korean company will use a subsidiary of FuelCell Energy to develop the fuel cell business in South Korea. The installed fleet in this country consists of 18 sites, and it represents in total 170 megawatts. Dong Jun Yoon, President and Chief Executive Officer of POSCO Energy, commented the following about the new agreement:

“We believe FuelCell Energy will be successful in the significant Asian utility-scale stationary fuel cell market by now directly marketing its high quality products.” Source

Are they comparable stocks?Yes, they are comparable. Their market capitalization and revenue are very similar. Take a look at their figures:

Source: Insider Financial

As we expected, the EV/Revenue ratio of PLUG is much larger than that of the other competitors. This is due to the recent agreement with Amazon. Since they operate the same technology, we expect the other two stocks to rise more than PLUG in the future. We explain later how you can profit from this inefficiency of the market.StrategyTo sum up, it seems that the rivals of Plug Power Inc. are doing a really good job by signing collaboration agreements with big partners the way Plug has done it. Maybe these other companies could not obtain a contract with partners as big as Amazon, but since the technology is the same, they may do it in the future.Such investment play is a kind of "pair trading" strategy. We buy competitors that are trading at lower valuation as compared to Plug, which is trading quite high, because the market overreacted with the most recent news, and we wait for the "gap" to close.ConclusionThe recent agreement of PLUG with Amazon has created an inefficiency in the market. PLUG trades at much higher valuation than the other two competitors in the industry. The rivals are actually signing agreements with other big players, but the market has not recognized the value of these contracts yet.We believe that since they sell the same technology, the rivals may offer a more interesting investment play right now than PLUG. Thus, if they release good news or other agreements, the price of their shares may rise much more. We recommend you to take a look at their news or subscribe to our newsletter in order to profit. We will be updating our subscribers as soon as we know more. For the latest updates on FCEL, BLDP and PLUG, sign up belowDisclosure: We have no position in any of the securities mentioned and have not been compensated for this article.

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