Microturbine solutions provider Capstone Turbine Corporation (NASDAQ: CPST)
stock has skyrocketed on the clean energy theme driving up smart
and renewable energy stocks. The fuel cell companies
saw accelerated buying on the back of the $1.2 billion investment in Plug Power (NASDAQ: PLUG)
by SK Group. The Biden administration has made clean renewable energy a key initiative moving forward to rejoin the Paris Accords in pursuit of countering the effects of climate change. The landscape and narrative has changed as environmental-social-governance (ESG) theme investment gains momentum. Stocks that fall into the decarbonization movement get an extra bump in sentiment moving forward. However, the prudent investors should let the froth dissipate after the near parabolic run up and monitor opportunistic pullback price levels to gain exposure.
Q2 FY 2021 Earnings Release
On Nov. 11, 2020, Capstone reported its fiscal second-quarter 2021 results for the quarter ending September 2020. The Company reported total revenues of $14.9 million, down from $20.7 year-over-year (YoY). New gross product orders were $9.8 million, up from $5.5 million sequentially form Q1 2021. Positive cash from operating activities grew to $1.9 million in the quarter, representing a $3.7 million quarter-over-quarter improvement. Gross margins were 17% of revenues, up 2% YoY, despite (-28%) drop in total revenues related to ongoing negative impacts of COVID-19. Total inventory decreased by (-19%) or $3.7 million as of June 30, 2020 and (-32%) or $22.7 million as of March 31, 2020, supporting improved liquidity and positive working capital. The Company ended the quarter with $16.8 million in cash and cash equivalents. The Company also entered into an agreement with Goldman Sachs to upsize its $30 million note to $50 million at a “significantly reduced” interest rate for a new three-year term.
Q3 Preliminary Financial Results
On Jan. 6, 2021, Capstone released preliminary fiscal Q3 2021 results. Revenues rose to $20.6 million, up 30% sequentially and 18% YoY. As of Dec. 31, 2020, the Company had $32 million in cash and cash equivalents. New gross product bookings were $10.5 million, up 7% sequentially with a product book-to-bill ratio decreasing sequentially to 0.9-to-1 from 1.4-to-1 as a result of improved shipments.
Virtual Winter Conference 2021 Investor Presentation
On Jan. 15, 2021, Capstone presented the Virtual Winter Conference 2021. The presentation outlined the Company’s revenue growth strategy and positive EBITDA initiative. Capstone also detailed its newly issued patent for “a multiple fuel capable, pre-mixed, low emission injector for a high flame speed fuel combustion for hydrogen and renewable natural gas (RNG)”. The Company plans to release a 100% hydrogen fuel capable microturbine. It’s current turbines can use up to 20% hydrogen as a fuel source. Capstone detailed 100% renewable energy projects with German company B+K using wood waste to generate superheated air to power Capstone microturbines and with 247Solar to install solar powered microturbines in Morocco.
The slide deck also outlined how its fits the ESG principles that are creating strong tailwinds for investment in the global renewable energy sector. For Environmental, Capstone estimates its customers have generated over 368,000 tons of carbon savings in 2020. For Social, Capstone sponsors several programs for employees including Capstone Cares, Capstone Culture Club and Capstone U to educate, learn and work in communities for charitable events. For Governance, the Company has a diverse board of directors (BOD) composed of three women and three men with a female Compensation Committee Chair and female Audit Committee Chair. Prudent investors can monitor opportunistic pullbacks for entry levels.
CPST Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for CPST stock. The monthly rifle chart went parabolic on the stochastic mini pup through the $4.06 Fibonacci (fib) level. The monthly market structure high (MSH) buy triggered above $3.20 in February 2020. The parabolic price move peaked off the $15.28 fib before falling back under the monthly upper Bollinger Bands (BBs) at $12.47 as the monthly 5-period moving average (MA) is trying to catch up at $8.00. The weekly rifle chart formed a market structure high (MSH) sell trigger below $10.82 nearly overlapping with the daily 5-period MA. The weekly stochastic has peaked and setting up another cross up above the 80-band or a cross down through the 80-band to trigger a channel tightening. Prudent investors can use the channel tightening to monitor opportunistic pullback levels sit at the $10.04 fib, $9.10 fib, $8.00 fib and $7.29 fib. The upside trajectories range from the $15.28 fib to $20.52 fib. Due to the large run up, it’s prudent to let the froth clear before considering a position.
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