Nel ASA’s Strategic Pivot Faces Critical Test Amid Contract Collapse

Nel ASA NO0010081235

Shares of Norwegian hydrogen technology firm Nel ASA are trading near multi-year lows, a clear signal of eroding investor confidence. The company's order books are contracting at an alarming rate, even as its leadership stakes its future on an unproven new technological platform. With time potentially running out, the market is questioning whether this strategic shift can salvage the pioneering business.

The core operational challenge is a dramatic deterioration in Nel's project pipeline. Over the course of a single year, the firm's order backlog has nearly been cut in half, falling to NOK 984 million. This represents a 47% contraction compared to the third quarter of 2024. More concerning is the collapse in new order intake for its core business, which plummeted 64% year-over-year to just NOK 57 million.

These operational headwinds have already triggered severe cost-cutting measures. Approximately one-fifth of the workforce was laid off in early 2025, and a portion of the electrolyzer production capacity at Herøya was temporarily idled. The company has also been forced to reclaim equipment from delinquent customers. Market skepticism is now reflected in the stock's valuation, which trades below its book value with a price-to-book ratio of 0.87.

Financial Strain and Market Underperformance

An examination of the trailing twelve-month figures reveals the depth of the crisis facing Nel's business model. The company generated revenue of approximately NOK 1.05 billion but posted a net loss of nearly NOK 459 million. With a negative profit margin exceeding 43%, the cash burn remains substantial. One relative bright spot is the cash position, which stood at roughly NOK 1.76 billion as of September 2025, providing some near-term financial buffer. From an investment perspective, the equity has delivered a meager 0.26% return over the past year, significantly underperforming the OBX benchmark index.

Betting the Company on Next-Gen Technology

In response, management is attempting a forward escape by pivoting to its "Next-Generation Pressurized Alkaline" platform. Backed by EU funding of up to €135 million, the board approved the industrialization of this technology at Herøya in December 2025. The objective is to drastically reduce hydrogen production costs through modular containerized solutions.

The rollout plan is aggressive:
* Initial Investment: NOK 300 million for the first gigawatt of capacity.
* Commercial Launch: First half of 2026.
* Full-Scale Delivery: Industrial scaling commencing in 2027.

Given the high degree of uncertainty, analyst sentiment remains cautious, with a consensus leaning heavily toward "Sell" or "Underweight" recommendations. The average price target of NOK 2.22 suggests the stock is fairly valued at current levels, though some firms, like Kepler Cheuvreux, see further downside with a target of NOK 1.90.

All eyes are now on the next critical milestone: the release of fourth-quarter results on 26 February 2026. Investors will scrutinize whether the industrialization of the new platform is progressing on schedule and how the company's liquidity is holding up. Having lost 93% of its value since the 2021 peak, Nel ASA must use the coming quarters to prove that its technological transformation can ultimately pave the way to sustainable profitability.