Capstone Green Energy Corporation Down 74% But Technical Chart Points to Massive Upside
CGRN Stock Is a Way to Play the Future of Micro Green Energy
The global pursuit of clean energy and lower carbon emissions will likely power strong tailwinds for green energy stocks over the next few decades. Most investors likely haven’t heard of Capstone Green Energy Corporation (NASDAQ:CGRN). It wouldn’t be surprising, given the company’s tiny market cap of $55.0 million.
The company provides customizable microgrid battery storage solutions, microturbine energy systems, aftermarket parts, and monitoring software to lower carbon emissions and support the green energy initiative. CGRN has installed more than 10,000 units in 83 countries. (Source: “Capstone Overview,” Capstone Green Energy Corporation, last accessed February 4, 2022.)
Capstone stock traded as high as $13.69 in February 2021, but it has plummeted by 74% since then, including by 41% over the last three months. I view the selling of CGRN stock as an aggressive contrarian opportunity because the company has been reporting improved fundamentals.
Chart Points to Capstone Stock Potentially Doubling in Value
While there’s no assurance that CGRN stock will rally, the fact that Green Energy Corporation’s shares are down by as much as they are is compelling.
The below chart shows Capstone stock entrenched in a death cross, which is a bearish technical crossover pattern that appears when the 50-day moving average breaks below the 200-day moving average.
But Capstone Green Energy Corporation’s relative strength index (RSI) and moving average convergence/divergence (MACD) are showing signs of reversing to bullish.
The previous time CGRN stock’s RSI and MACD jumped (August–December 2021), its share price surged by about 75%.
Chart courtesy of StockCharts.com
For the aggressive trader, Capstone stock’s potential upward moves make it worth a look, especially if Green Energy Corporation sees a repeat of its August–December 2021 performance.
Drawing in the Fibonacci retracement levels reflects the potential reward. A rally could lead CGRN stock toward $5.58, $7.00, and $8.45, representing more than a doubling.
The insiders at Capstone have been buying shares of the company, which is a positive indicator. Over the last six months, insiders purchased 401,779 shares of Capstone stock in 26 transactions (and sold no CGRN shares). (Source: “Capstone Green Energy Corporation (CGRN),” Yahoo! Finance, last accessed February 4, 2022.)
This suggests commitment by the insiders during the period of selling.
The insiders could be wrong, but Capstone Green Energy Corporation delivering improving fundamentals and being well positioned for the clean energy push are bullish signs.
My view is that the company needs to continue ramping up its revenues, which analysts estimate will rise from $67.6 million in 2021 to $94.1 million in 2023.
This implies an attractive forward multiple of 0.6 times Capstone Green Energy Corporation’s consensus 2023 revenue estimate. Even a doubling of the price of CGRN stock wouldn’t look out of place if the revenue estimates pan out.