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Tales From The Future
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Tales From The Future. I picked my nickname because many advisors and investors claim they can predict the future of the (stock) markets and somehow pick the winners. I don't. I usually do not engage in short-term trading and myopic analysis (quarter by quarter, without looking at the big... More
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  • Alternative Propulsion Stocks Gone Mad (Tesla Gigafactory Fallout?) 3 comments
    Mar 4, 2014 7:35 PM | about stocks: PLUG, BLDP, FCEL, CBAK, MXWL

    Days after TSLA finally unveiled rough details about its upcoming giant battery plant (aka "Gigafactory", see my earlier articles and blog entries for details) other alternative propulsion system stocks seem to join in the frenzy with double-digit moves.

    Just five random examples of stock valuations gone mad in early March 2014 in this sector:

    • PLUG
    • FCEL
    • BLDP
    • CBAK
    • MXWL

    The first three (PLUG, FCEL and BLDP) on the list are hydrogen-related stocks, a technology that had troubles entering the mass market or even a profitbale market niche for many years. PLUG is listed publicly since 2000 - a year when people dreamed about the advent of the hydrogen economy. Then reality set in and PLUG basically lost all of its value in reverse splits, capital hikes etc. FCEL and BLDP didn't fare much better in terms of operating losses over many years.

    The fourth stock (NASDAQ:CBAK) is a Chinese battery maker. Readers should have a look at its numbers and see that the problem is the same here - the cost of revenue basically matches or even exceeds the revenue numbers over many quarters. Profitability was and is a problem for many battery makers (see the failures of A123, Ener1 and Valence in recent years) and CBAK is still struggling as well - the profit margins in batteries remain very low.

    Finally, we have MXWL in the field of capacitors and other industries ("The Company focuses on three lines of products: Ultracapacitors, High-Voltage Capacitors and Radiation-Mitigated Microelectronic Products.") This company at least has produced better numbers in recent quarters (managed to eek out a small net income in 2012 and 2013) and doesn't enjoy an outrageous valuation as the other four stocks.

    What's more disturbing is the fact that all stocks rose in recent days because of...

    • Tesla's "Gigafactory" news (especially strange because fuel cells are competitors to battery-only EVs and battery systems) and/or
    • "normal" new customer orders (see for PLUG and Walmart as an example: )

    I would use extreme caution in all these stocks (MXWL being the most promising one in my opinion with a relatively sane outlook and valuation among the five stocks).

    Short-term Traders may like such stocks with wild intraday swings, investors should stay away from them - it may take many more years for alternative propulsion systems (hydrogen, batteries, ultracapacitors...) to gain mass-market acceptance resulting in more stable revenue streams.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: I may go long MXWL in the future (at lower entry points).

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Comments (3)
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  • Tales From The Future
    , contributor
    Comments (6407) | Send Message
    Author’s reply » Addendum: It should also be noted that MXWL had to restate their earnings in 2013, details here:



    That issue should be solved now and lessons learned.
    4 Mar 2014, 08:10 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (6407) | Send Message
    Author’s reply » One can also add ZBB and many others to the list, all with triple-digit gains in early March 2014:



    The five stocks in the article were just an example.
    6 Mar 2014, 02:11 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (6407) | Send Message
    Author’s reply » As PLUG continues to move higher I still have the same questions:



    Once and if the "big boys" (Toyota, Honda and Hyundai) move back into hydrogen cars, I doubt the smaller players can be in more than a niche.


    I think PLUG has a really high valuation at about 1billion USD given the sales and sales outlook in forklifts "only".


    PS: Years ago, the plans of $PLUG and $HMC (2004-2008) and $F fizzled.
    7 Mar 2014, 12:10 PM Reply Like
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