New Trade for June 12th, 2023

Stocks inched higher this morning as cautiously optimistic investors placed their bets ahead of this week’s crucial Fed policy meeting. With the S&P 500 now more than 20% above its mid-October lows, the foundation for a new bull market is likely forming. 

Today we’re highlighting a small-cap company with business expansion and margin improvements on deck for the year’s second half. Wall Street foresees an average 72% upside in the next twelve months for this tiny company’s stock, which currently trades for less than $5 a share.  

Clean Energy Fuels (CLNE)

Natural gas is turning out to be one of the more popular petroleum fuels in the world right now. In fact, data from the Energy Information Administration (EIA) shows that natural gas was the second most widely used fuel in the U.S., accounting for 32% of the energy consumption in 2021, thanks to rapid adoption within the electricity sector.

Natural gas distributor, Clean Energy Fuels, is expanding its business beyond conventional natural gas in 2023. The company is diversifying its historical status as purely a fuel distributor towards in-house renewable natural gas (RNG) production. 

“Margin improvement is on deck heading into the second half,” Raymond James analyst Pavel Molchanov said. “For 2024, we estimate EBITDA approximately tripling, this being the first year with a meaningful contribution from in-house RNG production,” he continued.

The first quarter of 2023 was overshadowed by the historic run-up in the price of natural gas in California, which, ultimately, the company had to bear. Fortunately, the California gas costs run-up was isolated to principally January, with prices moderating in California by March. Also, on the positive side, natural gas costs declined and have remained consistently low outside of California. 

CLNE share price has lost nearly 22% of its value year to date. The current consensus among 11 polled investment analysts is to Buy CLNE. A median 12-month price target of $7 represents a 60% increase.  

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