Clean Energy Fuels Corp (CLNE) has large exposure to the commodity pricing of natural gas in North America, as the company owns stations that distribute CNG and LNG, leading Pavel Molchanov, Analyst at Raymond James & Associates, to avoid the stock based on the company’s performance and outlook.
“The company has negative EBITDA, burning cash, even without taking capital spending into account, and it’s trading at about four times revenue. For a commodity company with low barriers to entry that’s nowhere near profitability and trading at four times revenue, that’s a stock that I would definitely avoid,” Molchanov said.
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Molchanov says CLNE is the biggest distributor of natural gas fuels in North America, which would give it some first-mover advantages, but the pure-commodity nature of the business leads him to avoid the stock altogether.
“One stock, though, I would tell people to avoid is Clean Energy Fuels,” Molchanov said. “This is a company that quite simply produces and distributes the actual fuel. They own the gas stations that distribute compressed and liquefied natural gas. This is a pure commodity business with no technological advantage.”