Bloom Energy Has a Bright Future, But It’s Not Here Yet

Bloom Energy (NYSE: BE) will report earnings on February 10. The whisper number shows the company will deliver a five-cent beat on the bottom line and generate 5 cents per share on $221.08 million. That would make it four quarters in a row of earnings beats for Bloom Energy. But more significantly it will be the first time since the company went public in 2018 that they have posted positive earnings per share.

That optimism is showing up in Bloom Energy’s stock. Over the last 12 months, BE stock is up 326%. And in 2021 alone, the stock is up 56%.

However, analysts are throwing up the caution flag. The consensus price target for the company is $28.20 which is over 33% lower than the current price of BE stock. There is good news and bad news to come out of this. The good news is that analysts are seeing the company’s cost-saving initiatives pay off. And that is reflected in the company’s earnings.

The bad news is that as other companies have shown throughout the pandemic, playing defense only gets you so far. Several analysts believe that Bloom Energy is likely to be chasing revenue even as the nation begins to embrace a hydrogen future.

Momentum For Hydrogen Is Growing

Hydrogen may be the clean energy story of this decade. For many reasons, hydrogen has struggled to gain mainstream adoption. Whether that was due to it being too expensive or perceived as too complicated, hydrogen has been a clean energy source that seemed so close, yet so far away.

In 2021, acceptance of hydrogen is growing, but it’s still got some time to go. It’s a question of whether you perceive the glass as half-empty or half-full. For example:

• 5 states currently have 100% clean energy mandates
• 6 states currently have 100% clean energy goals
• 10 states have issued new proposals for similar targets since 2019

All of this suggests that there is real momentum for clean energy and that is only going to be accelerated by the Biden Climate Plan which sets a goal for 35% carbon-free electricity by 2035 and puts the U.S. on a path to being a net-zero economy by 2050.

Utilities will be at the forefront of the effort to meet clean energy targets and that plays to the strength of Bloom Energy.

Not an Electric Vehicle Play

Investors have been hearing a lot about the opportunity that hydrogen fuel cells provide in electric vehicle (EV) applications. However, the EV space is looking like a bubble at the moment. That plays to Bloom Energy’s advantage.

Bloom is focusing its efforts on hydrogen’s use in industrial applications. The company manufactures systems that provide “clean, cost-effective AlwaysON electricity for organizations and communities.” Bloom Energy is betting big on the idea that hydrogen will be an essential part of renovating America’s aging power grid. Bloom is also focusing on cleaning the emissions from large container ships.

The problem is that Bloom Energy has not been profitable with its existing technology and now it’s trying to pivot into new technologies. That’s a challenging tight rope to walk. And it means there are no quick wins for Bloom Energy.

BE Stock Is Out In Front Of the Analysts

Analysts are generally bullish on Bloom Energy. In fact, in the last month, three analysts increased their price target for BE stock. However, those price targets are still 15% to 20% lower than the stock’s current price.

Of course, the active trading community would counter that point by saying BE stock, and any stock for that matter is worth what traders are willing to pay. Particularly when hydrogen is expected to play a large role in the world’s clean energy future.

Fair enough, but if you believe that the fundamentals matter then you have to be careful with BE stock at this level. The stock is likely to move higher after earnings. But hydrogen stocks remain a speculative investment in a technology that is still in its early stages.