FuelCell Energy Inc (NASDAQ:FCEL) saw its stock jump 27.5% on Friday after Jefferies analyst Julien Dumoulin Smith upgraded the shares from Hold to Buy and raised the price target to $24.00 from $16.00.
The upgrade followed news that the company secured its first contracted order tied to U.S. data center power via Fit Energy, an energy infrastructure platform. The agreement covers 380 MW in total capacity and includes 30 MW of firm capacity backed by an immediate, non-refundable deposit. At roughly $3,000 per kilowatt pre-ITC, that 30 MW of firm capacity implies about $90 million of revenue.
Dumoulin Smith said the company’s position has shifted from a 'show me' phase to one of executing on a visible backlog. He also pointed to valuation upside, noting FuelCell Energy trades at about 8x 2030 EV/EBITDA versus Bloom Energy’s 19x multiple, which he characterized as an asymmetric entry point for investors.
The analyst emphasized FuelCell Energy’s 5 GW U.S. pipeline, 89% of which is related to data center projects. He highlighted that even a 10% conversion rate of that pipeline would translate to 500 MW of orders, which is more than five times the company’s current annual capacity.
On the production side, FuelCell Energy is expanding its Torrington manufacturing facility with the intent to scale capacity roughly five-fold. Management has outlined a capital expenditure plan of $200 million to $275 million over 24 months to support that build-out.
The company’s balance sheet includes approximately $426 million of unrestricted cash. Management guidance anticipates a 100 MW production run-rate next year, 10-15% product margins at that run-rate, and adjusted EBITDA breakeven by the fourth quarter of 2027.
Details of the Fit Energy agreement also include 12 million warrants with a $26.44 strike price that vest only as Fit Energy makes deposits. The balance of the 380 MW under the agreement - the remaining 350 MW - will be delivered in phased stages.
Context and implications
Investors reacted quickly to the combination of a tangible contracted order tied to data-center power demand, an analyst upgrade and a higher price target. The company’s stated production and margin targets, the planned Torrington expansion and its cash position were all cited by Jefferies as components that support the revised rating.
While the upgrade and the Fit Energy contract were central to the market move, Jefferies’ valuation comparison with a peer and the size and composition of FuelCell Energy’s pipeline formed the basis for the analyst’s longer-term outlook.