Something seems to be charging up at FuelCell Energy ($FCEL), and might even be reminiscent of a Doc Brown proclaiming 1.21 Gigawatts. Recent SEC filings show that $FCEL insider and chairman John Rolls bought $199k worth of stock on the open market, his largest purchase since 2005. Let’s break this down:
- Largest purchase since 2005
- 152,000 shares at a price of $1.31 each
- Total holdings now come in at 317,270 shares (from SEC filings)
Why this matters
Okay, awesome. He had some money to burn. But why buy the equivalent of a used Lamborghini in stock? Insider transactions have to be reported, and share sales by company insiders are usually done on publicly available schedules, to avoid views of impropriety, and combat insider trading. Reasons for selling also vary. Daughter’s wedding? Sell some shares. Massive 6-month world tour vacation? Sell some shares. Financing research on the effect of peanut butter as it reacts to uncoated iron? Sell some shares. But buying? Something could be afoot that we aren’t sure of yet.
$FCEL shares have plunged 89% in the 5 years between his purchases (previous purchase was for $101,000 in stock), so this could be either a great move towards dollar cost averaging, or it could be the fact that analysts have been giving FuelCell decent price targets. A blended average right now sits north of $3 per share, well over a 100% upside to the purchase price, with some analysts giving the stock a $15 per share price target.
It’s <$2, you seriously expect it to hit $15?
If someone would have told me that McDonald’s ($MCD) would start having a 100% uptime on their ice cream machines, then we would be talking about fantasy land. But a $9-$15 price target for #FCEL doesn’t seem to far fetched. Here’s why.
Increased infrastructure spending, along with the companies focus on industrial and utility grade distributed power grid systems (read, not your average 9V battery) means that it will benefit from guaranteed money from municipalities, and its multi-country approach means it doesn’t rely on just the US, it works with countries around the world with ageing power grids. South Korea, England, Germany, Canada, and Spain all make the client list, and last time I checked, they were all developed economies with major needs.
How you make money
Buying and holding this stock would be an easy way to go here, with its low price, coupled with significant upside. It’s 14% above its 52-week low, but still 46% down from its 52-week high, giving it some major upside potential.
Want to play options? Assuming you’re incredibly bullish on the stock and think that the magic $15 a share price point is achievable, controlling 10 contracts at a $.05 per option price point, you risk $50 to control 1,000 shares of $FCEL. Getting in and buying 18 JAN 19 $10 CALL and it getting close to that price point has you enter in at $50, and assuming it hits $11 by 18 JAN 19, you stand to have these options worth $1 each, or $1,000 total, for a total profit of $950 (a 1,900% return on your money) (minus trading platform fees).
Even if the stock only reaches $4 by October 6th, exiting the option position would bring you a healthy 520% return with a net gain of $260 on your $50 entry point.