Since the beginning of the year, retail traders on social media platform Reddit have orchestrated several short squeezes on fundamentally weak stocks that have resulted in rallies in their share prices. Two such recent meme stocks trending right now are Camber Energy (CEI) and Clean Energy Fuels (CLNE).
But while Camber Energy’s stock has almost doubled in price over the last six months, Clean Energy Fuels shares have gained approximately 8% in the last month. Several stocks that trend on Reddit are not viable long-term bets, making the recent uptick unsustainable in many if not most cases.
So, let’s evaluate if CEI and CLNE can move higher in price the coming months or if they will underperform the broader markets through year’s end and beyond.
An independent oil and natural gas company, CEI in Houston, Tex., acquires, develops, and sells crude oil, natural gas and natural gas liquids or NGL. The stock has surged 330% in price since Aug. 24 after it collaborated with ESG Clean Energy to secure a license for the latter’s carbon-capture system in Canada and some parts of the U.S.
This patented system leverages waste heat to capture CO2 gases released from combustion engines, enabling it to produce clean electricity. This technology will be used across several industries that include cryptocurrency mining, data centers, and recycling facilities.
Camber’s CEO James Doris explained, “In my view, this transaction positions us as an industry leader in terms of being able to assist with the power generation needs of commercial and industrial organizations, while at the same time helping them reduce their carbon footprint to satisfy regulatory requirements or to simply follow best ESG practices.”
But the recent bull run in Camber stock could also be due to its popularity on Reddit as a meme stock, in addition to rising oil and gas prices.
Clean Energy Fuels
CLNE in Newport Beach, Calif., provides natural gas as an alternative fuel for vehicle fleets in the U.S. and Canada. It supplies RNG (renewable natural gas), CNG (compressed natural gas), and LNG (liquified natural gas) for light-, medium-, and heavy-duty vehicles. The company also offers operation and maintenance services for vehicle fleet customer stations.
CLNE has seen its sales decline from $342 million in 2017 to $291 million in 2020. However, its operating loss has narrowed from $66 million to $9.88 million over this period on the back of higher gross margins and lower operating expenses.
As pandemic-related restrictions were lifted in Q2, the company delivered 101.4 million gallons, representing a 13% increase year over year versus 89.5 million gallons in Q2 of 2020.
CLNE’s revenue in the second quarter was up 28.9% year over year at $79 million, versus $61.3 million in the year-ago period. The increase in its top line was attributed to higher natural gas prices, favorable fuel price mix, and an increase in the number of gallons delivered.
Wall Street expects its sales to fall by 7% year over year to $271 million in 2021 and rise by 34% to $364 million in 2022. This will allow CLNE to improve its profit margins from a $0.05 loss per share in 2020 to $0.03 earnings per share in 2022.
CEI is valued at a market cap of $406 million and is trading at a trailing price to sales multiple of an astonishing 1,485x given it reported sales of just $274,000 in the last 12-months. In comparison, CLNE is valued at a far lower P/S multiple of 6.6x making it, we think, a much safer bet.
Further, Clean Energy Fuels is also expected to grow earnings and revenue at a fast clip in 2022, while there is no visibility for investors regarding Camber Energy expected revenue growth.
CEI shares fell $0.02 (-1.04%) in after-hours trading Tuesday. Year-to-date, CEI has gained 55.96%, versus a 17.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More…