Is UK Hydrogen Fuel Cell Manufacturer, AFC Energy's stock price (AFC)(FTSE) ready to bounce?
AFC's market cap is £70 million. The stock has seen a huge decline in recent years. Are the technicals the fundamentals & financials' now saying buy. Does the price represent value?
Comprehensive Technical, Financial And Fundamental Analysis Report: AFC Energy PLC (AFC) A #TriFusionAI And #Swazcharts Special Market Report Date: October 16, 2024 Current Price: 8.19 GBX (-1.21%) Market Capitalisation 70.83M.
AFC Energy Plc engages in the development of fuel cells. Its objective is to install, own, operate, and maintain stationary alkaline systems that generate durable power of fuel efficiency for the future. The company was founded on January 9, 2006 and is headquartered in Cranleigh, the United Kingdom.
“AFC Energy is positioned to benefit from the global transition toward hydrogen as a clean energy source.”
Setting the Scene: AFC Energy PLC.
AFC Energy PLC (AFC) is a UK-based energy technology company specialising in developing hydrogen fuel cells for clean energy generation. The company’s core focus is on providing zero-emission hydrogen power solutions for industries such as transportation, maritime, and construction. As the world shifts toward cleaner energy sources, hydrogen technology is a crucial component in decarbonizing high-emission industries, giving AFC Energy a strong position in this rapidly growing sector.
AFC Energy has been involved in several high-profile projects and partnerships that have helped to build momentum for its fuel cell technology. However, the stock has experienced volatility, driven by broader market conditions, the pace of hydrogen adoption, and competition from other green energy technologies. The company continues to invest heavily in research and development, which puts pressure on its financials, but the long-term potential for hydrogen energy remains a key driver of investor interest.
“The company has formed partnerships with key players across various industries, including transportation and heavy industries.”
Key Drivers.
Hydrogen Energy Transition: AFC Energy is positioned to benefit from the global transition toward hydrogen as a clean energy source. Governments worldwide are increasingly supporting hydrogen initiatives, which bodes well for AFC’s long-term growth.
Strategic Partnerships: The company has formed partnerships with key players across various industries, including transportation and heavy industries, to develop and implement its hydrogen fuel cell technology.
“AFC Energy, a UK-based provider of hydrogen power generation technologies, has launched Hyamtec, a wholly-owned subsidiary established to commercialize the company’s next-generation distributed ammonia cracking business.”
“Gary Bullard, Chief Executive of AFC Energy, stated: “The global transition to net zero is driving the urgent need for innovative hydrogen solutions, and ammonia cracking is emerging as a key enabler for industries aiming to decarbonise. With years of investment behind us, AFC Energy has built a robust ammonia-cracking technology that aligns perfectly with the needs of heavy industry. The creation of Hyamtec allows us to fully capitalise on this technology, bringing it to market in a way that unlocks new growth opportunities, both in the UK and globally.”
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Green Energy Mandates: AFC Energy is in a favourable regulatory environment, where governments are pushing for stricter emissions targets and the adoption of cleaner technologies. This external pressure on industries to decarbonize provides a long-term tailwind for AFC.
Challenges.
Technology and Adoption Risk: While hydrogen fuel cells offer significant potential, their widespread adoption is still in the early stages. AFC’s growth depends on the pace at which industries transition to hydrogen and the company’s ability to scale its technology efficiently.
Capital-Intensive Business Model: AFC Energy's business model requires substantial capital to fund ongoing research, development, and commercialisation. The company must balance its cash burn with its ability to secure new partnerships and revenue streams.
Competition in the Hydrogen Space: AFC faces increasing competition from other green energy technologies, including battery solutions and competing fuel cell providers. The hydrogen sector is becoming more crowded, and AFC will need to continue innovating to maintain its competitive edge.
“Hydrogen energy is gaining significant governmental and institutional backing.”
Fundamental Analysis and Financial Performance.
“In 2024, governments in Europe, Asia, and North America have continued to roll out hydrogen roadmaps and subsidies, which will directly benefit companies like AFC.”
Revenue and Profitability: AFC Energy is in the early stages of commercializing its hydrogen fuel cell technology and does not yet generate consistent revenue. The company’s financial performance is driven primarily by project milestones and partnership agreements. Profitability remains a long-term goal as AFC continues to invest in R&D and demonstration projects.
Cash Burn: AFC’s cash burn is significant due to its heavy investments in R&D and the capital-intensive nature of its projects. The company has raised funds through equity financing in the past, and investors should be mindful of the potential for further dilution if AFC does not secure additional revenue-generating projects soon.
Capital Expenditure: The company's capital expenditures are focused on advancing its fuel cell technology, scaling up production capacity, and deploying pilot projects with key partners. These investments are crucial to its long-term growth, but they also pressure its financials in the short term.
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Key Developments.
Hydrogen Partnerships: AFC has formed strategic partnerships across various sectors, including transportation and heavy industries, to develop hydrogen fuel cell solutions. These partnerships are critical to driving future revenue as the company moves toward commercialisation.
Hydrogen Adoption and Government Support: Hydrogen energy is gaining significant governmental and institutional backing, which is critical for AFC’s growth. In 2024, governments in Europe, Asia, and North America have continued to roll out hydrogen roadmaps and subsidies, which will directly benefit companies like AFC.
“AFC Energy has several demonstration projects underway, including in heavy transportation and maritime sectors.”
Progress on Projects: AFC Energy has several demonstration projects underway, including in heavy transportation and maritime sectors. The success of these projects is key to demonstrating the viability of AFC’s technology and securing future commercial contracts.
Investor Sentiment.
Market Outlook: Investor sentiment remains mixed, as the stock has been volatile due to broader market trends and competition in the hydrogen space. While there is strong long-term optimism around hydrogen technology, the near-term financial pressures and lack of profitability have kept some investors cautious. AFC’s ability to secure further partnerships and commercial contracts will be critical to improving sentiment.
Swazers Charts T.A. Idea AFC Energy
Technical Analysis.
Exponential Moving Averages (EMAs) 21 EMA (Short-Term): 10.69 GBX 50 EMA (Mid-Term): 12.34 GBX 100 EMA (Long-Term): 14.14 GBX 200 EMA (Major Indicator): 15.68 GBX.
AFC Energy is currently trading below all its key EMAs, indicating a sustained bearish trend in the stock. The 21 EMA and 50 EMA are acting as immediate resistance levels. The stock would need to break above these EMAs to regain upward momentum. The 200 EMA at 15.68 GBX acts as a significant long-term resistance level and would signal a major trend reversal if breached.
Descending Channel.
AFC Energy has been trading within a descending channel, characterized by lower highs and lower lows. The stock is near the lower boundary of the channel, suggesting the possibility of a bounce if support holds. However, continued downward pressure could result in a break below this channel, leading to further downside. For a bullish reversal, the stock needs to break above the upper boundary of the channel, which aligns with the 21 EMA and 50 EMA.
Fibonacci Retracement Levels. AFC Energy.
Using the longer-term downtrend from the 2021 highs, key Fibonacci retracement levels are 23.6% Retracement Level: 29.60 GBX 38.2% Retracement Level: 60.10 GBX 50% Retracement Level: 94.90 GBX.
“Higher volume on up-days would indicate renewed buying interest”.
The stock is currently trading far below these Fibonacci retracement levels, indicating significant downside from its previous highs. The 23.6% retracement level at 29.60 GBX is a key upside target in the event of a bullish reversal, though it is well above current price levels.
Volume and Market Sentiment. AFC Energy.
On-Balance Volume (OBV) Indicator.
The OBV has been declining, indicating that selling pressure has dominated the stock’s recent price action. This suggests that more investors have been oƯloading positions, contributing to the bearish momentum.
Accumulation/Distribution Line (A/D Line).
The A/D line also reflects weak sentiment, with little evidence of accumulation. Until the A/D line shows signs of improvement, it is unlikely that a strong bullish reversal will occur.
Volume Analysis.
Trading volumes have been relatively low, reflecting weak investor interest at current price levels. For a significant price move to occur, particularly a reversal, an increase in volume will be necessary. Higher volume on up-days would indicate renewed buying interest, but this has not yet materialised.
VWAP (Volume-Weighted Average Price).
The VWAP is currently above the stock’s price, around 10.00 GBX. This suggests that most recent buyers are underwater, which could further pressure the stock if sentiment does not improve.
Financial Gearing: Under the Hood. AFC Energy.
Debt-to-Equity Ratio: 0.25 AFC Energy maintains a relatively low debt-to-equity ratio, which reflects prudent financial management. The company has avoided over-leveraging itself, which gives it flexibility in raising additional capital through debt if needed. However, reliance on equity financing has led to dilution in the past.
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Interest Coverage Ratio.
Interest Coverage Ratio: N/A Due to its limited revenue and lack of profitability, AFC Energy does not have a meaningful interest coverage ratio. However, the company’s low debt levels mean that it does not face significant interest expenses at this stage.
Liquidity Ratios.
Current Ratio: 1.5 The company’s current ratio suggests that it has sufficient liquidity to meet its short-term obligations. However, as AFC continues to invest in its projects, this ratio will need to be monitored to ensure that liquidity does not become a concern.
Quick Ratio: 1.3 The quick ratio confirms that AFC can meet its immediate liabilities without relying on inventory or other less liquid assets. This is a positive sign for short-term financial health.
“Strong long-term potential, but near-term financial pressures remain.”
Support and Resistance Levels. AFC Energy.
Support Levels: 8.00 GBX, 7.50 GBX Resistance Levels: 10.69 GBX (21 EMA), 12.34 GBX (50 EMA), 29.60 GBX (23.6% Fibonacci).
The next support level for AFC Energy is around 8.00 GBX, with a deeper level of support at 7.50 GBX. The stock is currently testing this support and could bounce if buying interest returns. On the upside, resistance lies at the 21 EMA of 10.69 GBX, followed by the 50 EMA at 12.34 GBX. A break above these resistance levels would signal a potential reversal in momentum.
Cash Burn Status.
AFC Energy’s cash burn remains high due to ongoing investments in research and development and project deployment. The company has sufficient liquidity to meet its short-term obligations, but continued cash burn could require further fundraising efforts, particularly if revenue generation remains slow.
RAG Status: Amber – Manageable in the short term, but long-term sustainability will depend on securing additional contracts and funding.
RAG Status Summary. AFC Energy.
Conclusion and Final Thoughts.
AFC Energy is a speculative play within the growing hydrogen sector, which holds long-term potential as industries shift toward cleaner energy. The company has developed strong partnerships and continues to progress its technology, but near-term financial pressures and reliance on external financing remain challenges. The stock is currently in a downward trend, and a break above key EMAs will be necessary to signal a reversal. For investors with a long-term view, AFC’s position in the hydrogen market could present a significant upside if the company successfully scales its operations and capitalises on the growing demand for clean energy solutions. However, those with a shorter investment horizon should be mindful of the company’s financial risks and the current bearish trend.
"In investing, what is comfortable is rarely profitable." – Robert Arnott
#TriFusionAI © 2024 Bob Smith and John Swarbrick Follow us on Twitter: @BobSmithMSc and @SwazersC Disclaimer: This report is for educational purposes only and does not constitute financial advice. Consult a financial professional before making any investment decisions. Errors and omissions may be present. Follow on X
Great article and could be a very good buy for new investors 👍🏻