Clean Energy Fuels stock is up about 30% over the last week thanks to an influx of cash from Reddit investors. Just like GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc. (NYSE: AMC), they're eyeing this stock as a short squeeze play that could explode higher.
So far, they are succeeding.
However, Clean Energy Fuels Corp. (NASDAQ: CLNE) is not a short squeeze play, as the short interest is only around 7%.
It is a stock with a great story and what could be a very bright future.
Here's why this top stock is gaining some traction - and how you can play it...
Why Clean Energy Fuels Stock Is Rocketing Higher
Clean Energy Fuels is in the natural gas business. Specifically, the company sells natural gas in either compressed or liquified form. It also designs, builds, and operates public and private vehicle fleet customer stations in the United States and Canada.
Natural gas is clearly the bridge fuel to a renewable energy future, which is what's helping build hype around this company.
Even better, Clean Energy Fuels is doing something no one else is doing in the natural gas market. A substantial percentage of the natural gas it sells is from renewable sources like methane gas from dairy farms and landfills.
The California Air Resources Board says that renewable natural gas can have a "significantly negative carbon intensity score," which helps Clean Energy Fuels customers get to a net negative carbon emissions profile.
Clean Energy Fuels is also active in the environmental credits business. Every time it sells renewable natural gas as a vehicle fuel, it generates environmental credits at the federal level and at the state level in California and Oregon.
And it's partnering with several of the world's leading energy companies to do it. Currently it has joint ventures in place with Chevron Corp. (NYSE: CVX), TotalEnergies SE (NYSE: TOT), and BP Plc. (NYSE: BP) to develop renewable natural gas facilities.
Renewable natural gas has another advantage over other low-carbon transportation energy sources too.
The infrastructure needed to move renewable natural gas into the transportation system already exists. You don't need to build any charging stations or hydrogen fueling stations. The pipelines and local delivery trucks for natural gas have been in place for decades.
If hydrogen does become a major vehicle fuel source, then the natural gas fueling stations and systems that Clean Energy owns around the country can be converted to also deliver hydrogen.
That's why companies with big fleets of vehicles are embracing the idea of renewable natural gas.
Pac Anchor, a port drayage company that serves the ports of Long Beach and Los Angeles, has added 23 new trucks that will burn RNG to its fleet recently.
Biagi Brothers, a large nationwide carrier whose customers include Anheuser-Busch and PepsiCo, will deploy 12 new trucks burning RNG.
UPS has had a contract with Clean Energy for RNG in place since 2019.
In April, Clean Energy announced that it had signed a deal with Amazon.com Inc. (NASDAQ: AMZN) to provide renewable natural gas in 15 states.
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If you have noticed how many Amazon delivery trucks are running around today, you have some idea of how potentially enormous this deal could become.
Other customers of note for Clean Energy Fuels include Coca-Cola Co. (NYSE: KO), McDonald's Corp. (NYSE: MCD), Waste Management Inc. (NYSE: WM), FedEx Corp. (NYSE: FDX), and dozens of other leading companies that are trying to reduce the carbon footprint of their fleet.
The New York City Transit Department uses renewable natural gas form Clean Energy Fuels too. So does the Los Angeles County Metropolitan Transportation Authority.
The potential market when you consider heavy-duty trucking, bus fleets, and other industrial and government fleet markets could be for renewable natural gas going forward.
There is clearly a huge potential market for renewable natural gas products, so we should buy Clean Energy Fuels stock, right?
Is Clean Energy Fuels Stock a Buy Now?
Not necessarily. It is potentially a massive market. It is not there yet.
It is also a very low-margin business, so there is not a lot of room for error.
Clean Energy is not profitable yet, and revenue growth has not been high enough to justify a long-term investment in the company. If and when we see sales growth hitting 20% or more annually with black ink on the bottom line, the stock might belong in a growth stock portfolio.
The stock is up more than 300% over the past year mainly because of the great story and huge potential. The Reddit crowd has also helped to push the stock higher.
If the chatroom traders can get the stock back above the recent high at $10.50, shares of Clean Energy might be a decent momentum trade that could put some quick money in your pocket.
But investors hoping for a long-term hold are better off waiting for the company to justify its current share price.
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