Is Bloom Energy Stock a Buy?
Hydrogen is Earth's most abundant chemical element and could be vital in decarbonizing the global economy. Some see hydrogen as the "new oil" and say it could be a key component in helping companies meet carbon reduction goals.
Bloom Energy (NYSE: BE) is one company leading the charge. The hydrogen energy company has been working on manufacturing fuel cell and electrolyzer systems that could allow for grid-independent, low-carbon power generation. However, it still has work to do to improve its bottom line. Here's what you need to know if you're considering buying stock in Bloom Energy today.
Bloom Energy's technology could revolutionize clean energy production
Bloom Energy manufactures fuel cell-based power platforms that could be key in helping reduce carbon emissions. Clean hydrogen is made through an electrolyzer, which uses zero-carbon electricity to split water into hydrogen and oxygen. However, making clean hydrogen has been too expensive. Bloom Energy aims to fix this problem. It has been developing solid oxide technology to create hydrogen with less energy for over twenty years.
The Bloom Energy Server uses its proprietary solid oxide technology to convert fuel (natural gas, biogas, hydrogen) through an electrochemical process without combustion. These servers can be clustered together to provide customers with hundreds of kilowatts to hundreds of megawatts of energy based on their needs.
The company says that its platform helps customers meet lower carbon goals while solving the challenges of low-carbon solutions, including problems with reliability and cost. One big selling point is that it's designed to provide reliable energy that is resilient against weather events, cybersecurity attacks, or other grid outages. It can also be installed more quickly than new transmission lines.
A look at Bloom Energy's finances
Most of Bloom Energy's revenue comes from sales of its energy servers. Because its servers require significant upfront investments, it provides financing options or a pay-as-you-go model for customers to finance their acquisition. Many of its customers are large institutions with an investment-grade rating, although it has recently expanded to below-investment-grade and international customers.
Over the last five years, Bloom Energy's revenue has grown by 25% compounded annually. Last year, the hydrogen company raked in $1.3 billion in revenue. Despite this excellent top-line growth, it has failed to generate a profit since going public in 2018. Last year, the company had a net loss of $302 million. Over five years, it has lost $1.2 billion.
Another drawback to investing in Bloom Energy has been shareholder dilution. This happens when a company issues additional stock, reducing the ownership proportion for current shareholders. From 2018 to 2023, the company's shares outstanding went from 109 million to 225 million.
Long-term tailwinds could give the hydrogen company a boost
The future for clean hydrogen energy could be massive. According to a report by McKinsey, hydrogen demand could grow sixfold by 2050. In addition, the consulting group says that clean hydrogen could go from 1% of the total hydrogen market today to 30% in 2030 and 75% by 2040.
Bloom Energy also recently announced a collaboration with Shell. It is working with the energy company to study opportunities in "replicable, large-scale, solid oxide electrolyzer (SOEC) systems that would produce hydrogen for potential use at Shell assets."
This opportunity could be huge for Bloom Energy. Its SOEC technology could help produce clean hydrogen that could eventually reduce "gray" hydrogen currently produced at refineries with high carbon emissions. If successful, it could see widespread adoption of its solutions.
Is Bloom Energy stock right for you?
Investors must balance Bloom Energy's explosive upside potential for the clean hydrogen economy with its current financial situation. The company is leading the way in clean hydrogen technology. However, it could take years to become a viable, cash-generating entity. If your investing approach is more conservative, you'll want to wait for the company to generate profits consistently.
However, investors looking to get ahead of the clean hydrogen trend may find Bloom Energy's stock compelling. Bloom Energy's partnership with Shell shows that its technology is gaining acceptance in larger end markets. If you buy today, be aware of the possible dilution risk as losses pile up and size your investment appropriately.
Should you invest $1,000 in Bloom Energy right now?
Before you buy stock in Bloom Energy, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bloom Energy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $506,291!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 22, 2024
Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is Bloom Energy Stock a Buy? was originally published by The Motley Fool
