Nel ASA's 1.6 Billion NOK Cushion Faces a Critical Revenue Test

Nel faces analyst skepticism ahead of Q1 report despite a record order backlog. Price targets are cut as revenue falls and cash burn persists, with new tech seen as key to long-term turnaround.

Investors in Norwegian hydrogen specialist Nel ASA are bracing for a pivotal first-quarter report on April 22. The company sits on a substantial liquidity buffer of 1.6 billion Norwegian kroner and a record order backlog exceeding 1.3 billion NOK, yet its ability to translate these advantages into actual revenue remains deeply in question. This disconnect has prompted a wave of skepticism from analysts, who are slashing price targets ahead of the earnings release.

The core issue is stark. While the order book has swelled, reported revenues are collapsing. For the full year 2025, Nel’s revenue shrank by 31% to 963 million NOK, accompanied by significant asset writedowns of 799 million NOK. The fourth quarter alone saw a 20% drop in revenue to 330 million NOK, with EBITDA remaining negative. Management attributes the gap to irregular delivery schedules for large-scale projects, an explanation that has failed to convince the market.

This skepticism is reflected in revised analyst forecasts. Morgan Stanley drastically cut its price target from 3.50 to 2.00 Norwegian kroner. Citigroup reduced its fair value estimate to 2.40 NOK, while Berenberg lowered its target to 2.30 NOK. Both Berenberg and Citigroup maintain neutral ratings but cite a consistent list of concerns: persistent cash burn, risks of shareholder dilution, and a hydrogen sector grappling with overcapacity and delayed investment decisions.

James Carmichael, an analyst at Berenberg, highlights the unpredictable conversion of orders into real earnings and the unproven market readiness of Nel's new technology as key risks.

The upcoming quarterly statement is shadowed by an additional concern. Management is currently reviewing the book values for two idled production lines at its Herøya facility, raising the threat of further impairments that could weigh on already weak year-ago results.

Despite the near-term headwinds, Nel’s long-term strategy hinges on a new technological platform. The Next Generation Pressurized Alkaline electrolyser, in development since 2018, is slated for a commercial launch in the first half of 2026, with large-scale deliveries expected from 2027. The system promises to slash production costs by up to 60%. The European Union is backing the project with up to 135 million euros in innovation funds, covering as much as 60% of relevant investment and operating costs. The first gigawatt of production capacity is estimated to cost around 300 million NOK before subsidies.

Concurrently, the company is overhauling its internal structures. An extraordinary general meeting in mid-April replaced the old stock option program with performance-based allocations. Nearly 15 million of these units now tie executive compensation to strict performance targets.

Trading activity paints a fragile picture. The share recently gained almost six percent to 0.21 euros in Frankfurt, briefly nudging above its 200-day moving average. However, with a Relative Strength Index hovering around 35, the stock continues to signal an oversold condition without yet sparking a sustained recovery. The current price sits roughly 18% below its 52-week high from July 2025.

The message from the market is clear. Nel must demonstrate that its record order backlog is finally generating tangible income. If the Q1 report on April 22 fails to show revenue and orders converging, the company’s substantial war chest and technological promises will provide little defense against the newly lowered analyst targets. The next test would then swiftly arrive with the half-year figures on July 15.