Why FuelCell EnergyStock Dropped on Monday
Key Points
FuelCell will expand a Connecticut factory to support 500 megawatts (MW) of annual fuel cell production.
The expansion could cost up to $275 million.
And that's not all FuelCell will be spending over the next few years.
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FuelCell Energy (NASDAQ:FCEL) stock tumbled 9.5% through 12:05 p.m. ET Monday. Curiously, the only real news out on FuelCell today is an HR move:
FuelCell just announced it's hiring John Dansby, a former Carrier Corporation Global Vice President of Operations, to become its new Senior Vice President for Scale Up Manufacturing.
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Image source: Getty Images.
What's the matter with Mr. Dansby?
Are investors really so upset about Mr. Dansby joining the company, though? I don't think he should take it personally. More likely, FuelCell stock is suffering from the reminder of the specific task Dansby is being hired to perform: Expanding the company's Torrington, Conn., factory to support 500 megawatts (MW) of annual fuel cell production.
This is more a reminder than a revelation, because FuelCell actually announced this expansion four months ago. Torrington is currently designed to produce up to 100 MW of fuel cells per year. With demand for supplemental off-grid energy to power artificial intelligence data centers growing, the company had previously planned to grow its capacity to 350 MW -- and now it's upping the limit again, to 500 MW.
https://hartfordbusiness.com/article/fuelcell-plans-up-to-275m-torrington-expansion-as-data-center-demand-grows/
What it means for FuelCell stock
So what's wrong with that? Well, for one thing, Torrington isn't yet producing even the 100 MW it's currently rated for. At last report, there was only enough demand for 41 MW of fuel cells annually.
For another, the expansion will cost between $200 million and $275 million and take about 24 months to complete. Combined with other expenditures the company has planned, analysts polled by S&P Global Market Intelligence think FuelCell could rack up more than $500 million in capital spending over the next three years -- and won't turn free cash flow positive before 2030 (if then).
Mr. Danby isn't what investors are worrying about. Cash burn is.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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