The AFC share price just tanked! Is now the time to buy?

The AFC share price fell nearly 10% on Wednesday after the H1 revenue announcement. So, should I add this stock to my portfolio?

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The AFC Energy (LSE:AFC) share price has been on a downward track over the past year. The stock is down 66% over the past 12 months. These losses were compounded on Wednesday as shares fell over 9% before midday.

So, what does this company do, and is it right for my portfolio?

What does AFC Energy do?

AFC Energy is a Surrey-based company developing industrial fuel cells. The firm has excellent green credentials, developing low-cost alkaline fuel cell systems using hydrogen to produce zero-emission electricity.

The company is developing a range of hydrogen fuel cells and hydrogen carrier fuel conversion technologies for application in multiple sectors. The products can be used in construction, electric vehicle charging, shipping, and data centres.

AFC says its offerings can help off-grid operators around the world deliver their net-zero commitments.

Prospects

Some analysts are uncertain about the market for these off-grid hydrogen fuel cells. And there’s definitely some concern for me here. The issue essentially revolves around how easy it is to get the hydrogen fuel to the operating site and how economical and effective the fuel cells actually are.

For example, the group is pushing forward with a project to deploy its technology to power electric vehicle recharging stations. However, in the UK at least, you’d expect it’d be relatively simple to connect electric vehicle charging stations to the grid. In which case, there wouldn’t be much need for the fuel cell. However, this may be more useful in less densely populated nations like Australia.

The firm is perhaps best known for powering the off-road vehicles that shoot around the racetracks of Extreme E. However, I think this highlights my point. I can’t see a massive call for its application in non-remote parts of the world. And to date, the EV revolution has been more of an urban phenomenon.

That’s not to say there won’t be other applications for this technology. The company has signed a lease agreement with construction group Keltbray to supply its technology. I’ll keep a close eye on this agreement and see whether there’s scope for growth here.

The fuel cell specialist will deploy its first mobile hydrogen-based Power Towers later this year. The deployment was cited as means of further validating the company’s value proposition, with construction sites the focus. 

Performance

The company announced its half-year results on Wednesday, and they were a little disappointing.

Half-year revenues came in at £276,000, most of which came from the electric vehicle rally Extreme E. The group said that some of the revenues came from its partnership with a Swiss engineering group. Losses in the last six months hit £8.5m.

Cash use was £6.7m, meaning the company had a cash balance of around £48.6m at the end of March.

Will I buy?

So, will I buy AFC Energy for my portfolio? While I have a lot of interest in hydrogen power, this one is a little speculative for me right now. However, I’ll be keeping a close eye on developments.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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