When it comes to renewable and alternative energy, not every company may be quite what it seems to be on the surface. Some companies have smaller addressable markets, and some companies have large addressable markets. Some companies are truly green and clean, while others might be considered less-dirty than fossil fuels.

Another issue to consider about alternative energy companies is that there are dozens of them in the space with very small market capitalizations, and that generally means that very few analysts are willing to cover them with formal Buy, Hold and Sell ratings. But some analysts are willing to cover them, and they occasionally offer up huge price targets.

Oppenheimer made two key calls on Wednesday, October 4, 2017. Capstone Turbine Corp. (NASDAQ: CPST) was raised to Outperform from Perform with a $2 price target. That’s up almost 200% from the prior $0.70 closing price. FuelCell Energy Inc. (NASDAQ: FCEL) was started with an Outperform rating and assigned a $4 price target, up more than 100% from the previous $1.89 closing price.

As a reminder, traditional analyst calls in large companies in the Dow and S&P 500 currently come with upside projections of 8% to 15% for a total return. When you see an analyst calling for upside of 100% to 200%, chances are pretty high that there is a whole lot more risk than investors might be taking in some of the more stable dividend payers.

One more reminder regarding such high analyst upside targets. Investors should only use aggressive research reports for one source of information, or as a starting point rather than as a diving rod. It turns out that many analyst reports end up with the wrong outcome, or that the basis for the call changes — and changes drastically. We wouldn’t want you thinking that every analyst report comes true and will be right just because someone smart issued a rating on them.

Capstone Turbine shares were up 10% ahead of Wednesday’s open at $0.77, but the stock was up about 8% after 30 minutes of trading. This stock has a 52-week trading range of $0.58 to $1.48. Oppenheimer’s Colin Rusch and team have two premises for the upgrade. One is that the company has rationalized its overhead while working through a difficult demand cycle. Second is that its $24 million enterprise value (including about $10 million in net cash) is against almost $100 million in annual sales.

What stands out here is that Oppenheimer adjusted estimates modestly lower, but it thinks that sales and gross margin have bottomed out at a time that Capstone is actively and effectively managing its cash. There may even be more upside if you read the thesis here:

We anticipate order activity to pick up and estimate the company will reach EBITDA break-even in Fiscal Year 2019 as that order activity translates into sales growth. We are introducing a $2 price target and note that, if the company reaches profitability, there is potential upside to our target.

Rusch also pointed out that oil and gas prices may now better support Capstone. The report said:

Oil and gas prices likely to support growth. With oil and gas prices off 2016 lows and relatively stable for several quarters, we believe increased cash flow on drilling assets is improving which we believe could lead to new drilling investments as well as re-investment in existing sites. Capstone has historically been a beneficiary of such investments.

FuelCell Energy’s stock was initially indicated up almost 6% at $2.00 in the premarket, but the stock was last seen 11% at $2.10 after about 30 minutes of trading. The 52-week range is $0.80 to $5.67, and the consensus analyst target is $2.70.

While FuelCell is a rather speculative stock, Oppenheimer’s double-your-money target was based on just 1.5-times the company’s 2019 revenue estimate (and discounted 15% for a year). Rusch and team believe that FuelCell Energy is the clear leader in stationary fuel cell applications. The company is said to be positioned to reach positive operational cash flow in the next 12 months to 18 months, and the firm expects that incremental project wins with U.S. utilities and college/corporate campuses and equipment sales in Asia will act as key catalysts ahead.

Oppenheimer noted a fresh capital raise giving FuelCell a balance sheet that will support growth. As far as breaking even on cash flow, Oppenheimer said this:

We believe the company has two paths to operational cash flow breakeven. The first is to grow hardware sales, which we believe will come from multiple geographies, the northeast US, California, and Korea. The second is for FuelCell to continue growing its owned asset base and the recurring income that is generated by those assets.

Again, aggressive analyst reports should always be used as just one point of determining upside and evaluating risks.

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