Stock Analysis & Ideas

Why Bloom Energy Stock Can Outperform

Buoyed by ongoing talks of less reliance on Russian fossil fuels and thanks to some recent analyst rating upgrades, Bloom Energy (BE) shares are up 4.5% year-to-date to $23.15 a unit, while the industrials sector is down 4.6% as of this writing.

Anticipating greater demand for its product in the future, I believe the stock price will trade much higher than its current levels.

Thus, I am bullish on this stock. 

Bloom Energy 

Bloom Energy Corporation is a San Jose, California-based manufacturer and marketer of solid oxide fuel cell systems for on-site power generation directly at critical infrastructure.

The technology uses an electrochemical process that converts either natural gas, biogas, hydrogen, or their mixture into electricity without combustion.

It serves data centers, hospitals, healthcare, manufacturing, and biotech facilities, as well as grocery stores, hardware stores, banks, and telecommunication facilities. 

Q4 and FY 2021 Results

According to Bloom Energy, the final quarter of 2021 and the full year were a record quarter and a record year, with total revenues of $342.5 million and nearly $972.2 million, respectively.

These items are respectively up over 37.3% and 22.4% year-over-year.

Net income from ongoing operations was a net loss of $0.55 per share for the full year and still a net loss of $0.05 per share for the fourth quarter of 2021.

The company said acceptances of its system hit an all-time high in both the last quarter of 2021 with 735 systems (up 63% year-over-year) and 2021 with 1,879 systems (up ~42% year-on-year).

Bloom Energy’s Financial Position

As of December 30, 2021, the balance sheet showed cash of $396 million and total debt of $1.13 billion.

The Altman Z-Score is -0.60, which means there is a risk that the company will fail within a few years if the profitability of current operations does not improve enough to strengthen the company’s financial position.

The Altman Z-Score predicts the probability that a company will go bankrupt within a few years. A value less than or equal to 1.8 indicates a “distressed zone,” so the probability of business failure is high.

Profitability Metrics

Bloom Energy’s gross profit margin (TTM) is 20.32% vs. the sector median of 29.09%. Also, its EBITDA margin (TTM) is -6.28% vs. the sector median of 13.28%, while the TTM net income margin is -16.92% vs. 6.50% for the sector.

The company’s financial position needs to improve, but the market outlook gives investors hope.

Outlook 

The size of the solid oxide fuel cell market, valued at $1.5 billion in early 2022, is projected to grow nearly 34% annually and reach $6.5 billion by 2027, according to marketandmarkets analysts. 

The following factors will be the main driving forces.

• The expected increase in subsidies that governments will provide to promote this type of technology.

• The technology enables efficient energy production by lowering costs while reducing emissions of CO2 and other greenhouse gases into the atmosphere.

• If technology implies more efficient use of fossil fuels, countries will want it to become more mainstream in their efforts to reduce their dependence on energy sources from other countries.

• Because no platinum is used in the construction of Bloom Energy technologies, unlike other competitors, the cost of sale and installation is lower than other companies. 

• The production costs will not be affected by the volatility of the precious metals markets due to the expected high level of uncertainty this year and in the coming years.

The Company’s Growth Strategy

The company’s growth strategy is focused on becoming a leader in the market for zero-carbon, zero-greenhouse gas power generation technologies and expanding specific alliances to capitalize on the anticipated acceleration in the use of hydrogen.

Wall Street’s Take

In the past three months, 10 Wall Street analysts have issued a 12-month price target for BE. The company has a Moderate Buy consensus rating based on five Buys, five Holds, and zero Sell ratings.

The average Bloom Energy stock forecast is $26.90, implying 18% upside potential.

Stock Statistics 

Shares are changing hands at $22.6 as of the writing of this article for a market cap of just over $4 billion and a P/E ratio of around -25. Its 52-week range is $12.55 to $37.01. 

The stock also has a price/book ratio of -90.7, a price-to-cash-flow ratio of -66.3, and a price-to-free-cash-flow ratio of -36.4. 

Furthermore, it is trading above its major moving averages, as the 50-day MA is $20.70, while the 200-day MA is $22.20. 

Conclusion

So, based on those metrics, the stock doesn’t look cheap, but given the growth prospects, it may be worth it.

These are driven by the strategic and shared goal of accelerating the process of going green in several of the world’s most industrialized economies.

The latter is almost a guarantee of success for this company and other companies with similar technology.

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