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Fuel-cell energy is a hot technology, so it isn't surprising that shares of most companies in this sector have been fired up. But one fuel-cell company that has yet to catch a spark is Medis Technologies (
MDTL
), which is developing fuel-cell energy for portable electronic devices, such as cellular phones, camcorders, and laptop computers. The stock, currently trading at 18, climbed as high as 27 in mid-September but has been slipping since then along with most other beleaguered technology stocks.
Medis is very much an underfollowed company. But the one major-firm analyst who has been tracking the company, William Hyler of CIBC World Markets, rates the stock a buy and has a 12-month price target of 45. "We continue to be excited by Medis' potential as a leader in the portable fuel-cell arena," says Hyler. It's positioned, he adds, to capitalize on the tremendous opportunities in providing portable power to an increasingly demanding consumer-electronics market.
LIQUID FUEL. Since fuel cells offer distinct advantages over battery power -- for instance, they deliver higher energy potential in smaller sizes -- the impact on Medis' bottom line could be significant, says the analyst. Medis, which is still a development-stage company, has yet to post operating revenues or earnings. In 1999, the company lost $1.79 per share, and Hyler projects a $1.20 loss for 2000. He doesn't expect profits until 2003, when its technology gets commercialized, earning 10 cents a share.
Medis' fuel-cell operations provides "the most exciting opportunity for investors over the near to medium term," says Hyler. The company's proprietary product is a so-called direct liquid methanol (DLM) fuel cell that he says is different from the proton-exchange membrane (PEM) fuel cells -- the kind that has already caught the enthusiasm of investors and the Street. Simply put, a fuel cell converts chemical energy into electrical energy in the same way that a battery does. But fuel cells don't store energy and don't need recharging.
Medis focuses primarily on liquid fuel cells since gas PEM fuel cells haven't been shown to be suitable for smaller devices needing less than 100 kilowatts due to lack of portability, says Hyler. PEM fuel cells, he adds, are better for larger, stationary applications, such as distributed power for homes and autos.
KEY FACTORS. With the influx of cell phones and other digital wireless gadgets, demand for portable fuel cells should soar, says Hyler. Existing battery technology, he believes, won't be sufficient to fuel these power-hungry devices for more than a few hours.
"Medis appears to have the highest energy-power density among competing liquid methanol fuel cells, as well as the shortest time to commercialization," notes Hyler. These are the two key factors that could "propel Medis to the forefront of alternative power sources for portable electronic devices," according to the analyst, who adds that Medis is bound to partner with larger companies to further accelerate the development of its fuel-cell technology.
Much of Medis' fuel-cell technology was developed in Israel. That country's largest aerospace technology company, Israel Aircraft Industries, owns a 30% stake in Medis. And Medis Chairman and CEO Robert Lifton acknowledges that he has had discussions with some large telecommunications and computer companies as potential customers and partners.
HEADY GOAL. "We are in talks for them to integrate our technology and modules in their phone systems," says Lifton. Among the companies that Medis has been in touch with are Motorola, Siemens, Samsung, Ericsson, and some U.S. and Asian computer and telecom companies. "Our goal is for our fuel-cell technology to be used in 80% of wireless phones," says Lifton.
Indeed, if Medis starts moving in that direction, says Lifton, "we will be the Intel in wireless phones." But first, Medis has to prove it's a real power play.
Copyright 2000, Bloomberg L.P.
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