Nel ASA: Defense Deals and Short Covering Drive Rally as Core Business Bleeds

Nel ASA surges 71% YTD on new electrolyzer and defense contract, but Q1 orders plummet 73% and competition intensifies. Stock at odds with weak fundamentals.

Nel ASA has hit a fresh 52-week high of €0.35, extending a year-to-date surge of 71.10% that has left many market watchers scratching their heads. The Norwegian hydrogen specialist is riding a wave of optimism tied to a new electrolyzer platform and a growing narrative around energy security and military applications. But beneath the surface, the operating picture tells a very different story—one of collapsing orders, intense price competition, and a balance sheet still healing from heavy impairments.

The rally has been powered by two distinct catalysts. First, the commercial launch in May of Nel's pressure-based alkaline electrolyzer platform, which the company claims can bring total project costs for a 25 MW installation below $1,450 per kilowatt—roughly half the cost of many recent industry projects. Second, the stock has benefited from a sharp retreat by short sellers: the reported short position, tracked by the Norwegian financial regulator, has slipped to 1.13% of shares outstanding, a decline of 0.14 percentage points. While hardly a short squeeze, the retreat signals that one source of downward pressure is easing.

Perhaps the most surprising element of Nel’s newfound momentum is its growing link to defense. In early 2025, Nel Hydrogen US secured a $6 million contract with Collins Aerospace to supply PEM electrolyzer stacks that produce oxygen aboard US Navy submarines. That niche reference—a small but highly defensible foothold—has helped position Nel as a provider of critical infrastructure for military bases and decentralized energy grids. The company’s marketing now explicitly targets defense and security applications, tapping into a theme that investors are chasing across markets.

Yet the operating numbers are starkly at odds with the share price. In the first quarter of 2026, Nel’s revenue slipped 5% to 148 million Norwegian kroner, while order intake crashed 73% to just 85 million kroner. The order backlog fell 24% to 1.113 billion kroner, and management has acknowledged that the current book does not ensure meaningful factory utilization in 2027. The PEM division was a particular drag, with revenue down 14% as project deliveries slowed and US research grants were delayed or cancelled.

The competitive landscape is only getting tougher. Just two weeks after Nel’s platform launch, Danish rival Stiesdal Hydrogen unveiled a 6.5 MW electrolyzer targeting system costs below €500 per kilowatt—well under Nel’s own target. ITM Power quotes around $1,166 per kilowatt for its PEM systems, while Chinese manufacturers are widely seen as the cost benchmark at roughly €500 per kilowatt. Nel’s technology must now win on price as well as performance, a daunting challenge in a market where project decisions are stalling.

The company is not without financial buffers. It ended March with around 1.4 billion kroner in cash, sufficient to fund operations to the end of 2026. An initial tranche of roughly €11 million from the EU Innovation Fund is expected in the current quarter, earmarked for industrializing the new alkaline platform at Herøya, where Nel aims to reach 500 MW of annual capacity by year-end. But the cash provides time, not orders.

Past impairments continue to weigh. In its 2025 full-year results, Nel booked 799 million kroner in writedowns, including 361 million on production equipment and 439 million on goodwill and intangible technology assets. The company is now reviewing the book value of two idled atmospheric electrolyzer lines at Herøya, each with 500 MW of capacity, raising the specter of further impairments. Staffing has been cut to roughly 300 employees—26% below the peak and 19% lower year-on-year—trimming personnel costs by 21% but also limiting the company’s ability to ramp up quickly if demand returns.

Analyst sentiment remains firmly negative. None of the 13 analysts covering the stock rate it a buy, and the average price target stands at 2.12 Norwegian kroner—well below current trading levels. That disconnect underscores the extent to which the rally is driven by narrative rather than fundamentals.

The real test comes on July 15, when CEO Håkon Volldal presents the half-year report. At that point, the market will look for concrete signals: order intake, project progress, and utilization at Herøya. Without visible commercial traction, the stock’s recent gains remain heavily dependent on hopes that the defense and hydrogen stories will eventually translate into hard revenue—hopes that will need to be backed by more than just a rising share price.