Why FuelCell Energy Stock Is Tumbling on Wednesday

It's a tough day for FuelCell Energy (FCEL 10.65%) shareholders. As of 1:50 p.m. ET the stock's down 10.5%, extending a sell-off that's been underway since the beginning of the month.

It's not difficult to identify the prompt for today's tumble either. That is, the company's raising money by issuing new stock, diluting existing shareholders' stakes.

Then there's the other thing.

Dilution ahead, but existing investors don't mind too much

FuelCell Energy made the announcement after Tuesday's closing bell rang, reporting it intends to raise $225 million via the sale of 10.7 million shares of its common stock at a price of $21.00 apiece. For perspective on those numbers, the 67.6 million shares already outstanding closed at just over $26.00 on Tuesday. The scope of Wednesday's setback is about what one would mathematically expect with this degree of dilution.

In fact, investors arguably aren't even pricing in the full dilutive impact of the offering. Shares are holding above $23.00 as of mid-day Wednesday, suggesting the market still sees more net value than the price buyers of the newly minted shares will be paying.

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NASDAQ: FCEL

FuelCell Energy

Today's Change

(-10.65%) $-2.77

Current Price

$23.20

Key Data Points

Market Cap

$1.8BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.Market cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day's Range

$20.59 - $23.38

52wk Range

$3.78 - $37.88

Volume

16.1M

Avg Vol

11.1M

Gross Margin

-1819.88%

And, perhaps that's the right call. While FuelCell Energy's total top line slumped slightly during the quarter ending in April, product revenue improved 38% year over year for the three-month stretch. Indeed, although its overall business isn't expected to grow at all this year, analysts expect its current expansion efforts -- and its move into the artificial intelligence data center space in particular -- to drive top-line growth of more than 46% next year, taking a sizable bite out of its ongoing losses as a result.

That's still just the beginning, though. A projection from Precedence Research suggests the worldwide fuel cell industry is poised to expand at an average annualized pace of 25% through 2035.

Pick your spot and dive in

That being said, it's worth noting that fellow fuel cell stocks Bloom Energy and Plug Power are also down by measurably more than the broad market is today, hinting at calculated profit-taking of the industry's top names following recent rallies. If that's the case, don't be surprised to see this weakness linger beyond today.

Just don't be afraid to dive into any of these names -- including FuelCell Energy -- in the midst of any such weakness, even if there's no certainty that a bottom has been made. All of these stocks are volatile in the near term, but have frequently reversed course without any warning, resuming long-term uptrends driven by growing interest in fuel cells as a source of electricity.