Capstone Turbine Still Making News

Includes: CPST, GE
by: VFC's Stock House

Although denied yet again at a prolonged period of trading above the two dollar mark, Capstone Turbine (NASDAQ:CPST) is still making headlines.

On Tuesday it was announced that a large U.S. energy and gas transmission company is adding a C800 and C65 to its already-robust fleet of c65 Capstone C65 microturbines.

While not a huge difference maker in terms of putting this company over the top, orders such as this one demonstrate the growing confidence that current customers have with Capstone's low-emission microturbines.

The re-orders keep rolling in, which should bode well for future earnings as Capstone treks towards profitability.

Last week the company also announced that it had received an order for two liquid natural gas (LNG) microturbines. The units will be installed on a Type C Tanker and will be certified by Lloyds Register of Shipping, according to a company press release.

Orders such as this one demonstrate the diversity of Capstone's low-emission products, which have also been tested in large vehicles such as trucks and buses.

The growing potential of CPST, and growing exposure, are extremely evident right now as the stock has responded from sub-$1 prices to highs of over two dollars in just over three months time.

The two dollar mark has become a barrier that has not been broken for more than a short period of time over the past few weeks, and it's likely that the shorts are attempting to keep this one in check before the situation gets out of hand for them.

The argument for the shorts - and there is some validity to this argument - will be that Capstone has yet to turn a profit, so regardless of the positive developments taking place, CPST is not a candidate to run any further until the orders translate into profits.

With that being acknowledged, the growing number of orders, re-orders and backlog shows that Capstone's products are in high demand right now.

Not only does that mean increased revenue for Capstone, but it also means that the company could be on the radar of an acquiring company who may work in the similar field of clean energy. After all, the current market cap would be chump change for a company like General Electric (NYSE:GE) right now.

Any rumors of a buyout could send the shorts scrambling to cover in a hurry.

That said, 2011 is shaping up to be a pivotal year for Capstone Turbine in terms of growth, but at the same time investors will be expecting to see that profitability is now within reach.

The potential is there, and if the shorts end up taking control, then it could be worth buying the dips.

Longs will be looking for a sustained breakthrough of the two dollar barrier.

Disclosure: I am long CPST.