Investors should avoid Clean Energy Fuels (NASDAQ:CLNE) stock for now. I say that despite the fact that the shares have positive catalysts, including backing from the Reddit crowd and an ESG-friendly business.
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Beyond those tenuous tailwinds, there are obvious signs that Clean Energy Fuels isn’t trending up. In fact, there are obvious signs that CLNE stock will likely move downward.
But before launching into why CLNE stock probably isn’t worth investing in now, let’s at least acknowledge the firm for what it is: An innovative company doing interesting things.
What Does Clean Energy Fuels Do?
Clean Energy Fuels captures renewable natural gas which it then uses to fuel transportation fleets, including heavy-duty trucks and buses that pollute the air with diesel and gasoline.
Clean Energy Fuels captures bio-methane from landfills and dairy farms and turns that organic waste into renewable natural gas. That natural gas, of course, is quite different from non-renewable natural gas derived from fossil fuel sources.
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The company is selling two distinct sets of solutions. First, it markets renewable natural gas products and services to vehicle fleets in order to make them cleaner.
For fleets that already run on non-renewable natural gas, the switch is easy. For those switching from diesel or gasoline, it is more complicated. Basically though, Clean Energy Fuels can enable almost all large vehicles to run on renewable natural gas.
Clean Energy Fuels also allows farms to generate revenue using a non-traditional method: The capture of methane gas emissions. Specifically, the company provides biogas-producing digesters to farms that want to try to make money from their gassy cows.
As cool as this idea is, CLNE stock will not necessarily rise on its merits alone. Indeed, there are a few signs which indicate that the shares won’t rocket upward anytime soon.
Story continuesClean Energy Doesn’t Have Massive Backing From Meme Investors
I started this article by mentioning that Clean Energy Fuels doesn’t have very strong catalysts. Although CLNE stock has been actively discussed on message boards, including Reddit, it doesn’t have enough momentum to shoot upward.
A lot of the talk about so-called meme stocks centers around short squeezes. When such squeezes occur, the impacted stocks rise massively in a short period of time.
However, CLNE stock does not have nearly enough short interest to trigger a squeeze. As of June 30, 8.82% of its stock was being sold short, according to both shortsqueeze.com and MarketBeat.
That’s nowhere near the 20% level that is usually necessary to create a short squeeze. So no one should expect Clean Energy’s shares to undergo a short squeeze anytime soon.
Overinflated Price Worries
InvestorPlace contributor Josh Enomoto recently noted that in a very bearish sign for CLNE stock, the largest shareholder in the name sold over 5 million of its shares in the five- week period leading up to June 10.
That investor clearly believed that the stock’s prices during that period were excessive.
In my opinion, many shareholders, including that large investor, are pouring over Clean Energy Fuels’ financial statements, and they don’t like what they see.
Numbers Tell the Story
The release of the company’s most recent 10-Q coincides with a downward trend in its shares. Clean Energy Fuels published its Q1 earnings release on March 31. From April 1 to this afternoon, the stock has declined from $14.52 to $9.11. That’s a 37% drop.
In the first three months of 2020, the company realized a $1.704 million profit on $75.7 million of revenue. During the same period a year later, it suffered a $7.169 million loss on $67.69 million of revenue. The deterioration was probably caused by the pandemic.
However, given investors’ lack of confidence in the company, the shares’ unclear path to a short squeeze, and its uninspiring financial results, I’d stay away from the stock.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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