Bloom Energy Corporation (BE) manufactures solid-oxide fuel cell systems for on-site power generation. It offers Bloom Energy Server, a stationary power generation platform that converts standard low-pressure natural gas or hydrogen into electricity through an electrochemical process without combustion. BE provides on-site power, utility, and grid support and primarily generates revenue through electricity, service, installation, and product streams.

BE is one of the best-performing stocks in 2020 as it immensely benefited from the booming hydrogen market. However, its most recent third-quarter results failed to impress the market. BE delivered a 6.6% sequential increase in its total revenue to $200.3 million. However, this implied a 14% year-over-year decline. The company reported a loss of $0.09 per share, significantly improving from the year-ago loss of $0.44 per share.

BE along with SK Engineering and Construction (SK E&C), powered two new clean energy facilities with fuel cell technology in South Korea in September. These new 28-megawatt deployments shall use BE’s non-combustion, electrochemical process to produce electricity with lower and predictable energy costs and enhanced reliability. This will also reduce carbon emissions.

BE has gained from the growing fascination among investors with alternative energy and improving science behind the emissions-free movement. Consequently, the stock is up 73.9% so far this year. However, because of declining oil prices and several other factors, BE has a “Sell” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates BE:

Trade Grade: F

BE is currently trading below its 50-day moving average of $16.65 but above its 200-day moving average of $11.38, indicating that the stock is neither in an uptrend nor in a downtrend. However, the stock’s 18.7% loss over the past month reflects a short-term bearishness.

Apart from the disappointing quarterly performance, the recent decline in oil prices has adversely affected BE. The cheaper oil gets, the fewer incentive companies have to switch to alternative fuels like hydrogen for their power needs.

Moreover, there have been several insider trading activities at BE recently starting from Pillai Hari, EVP of Customer Installations Group, who sold 2,083 shares back on October 27th and Venkataraman Swaminathan, the EVP & CTO of BE, also sold 5,068 shares during a trade that took place on October 21st.

Buy & Hold Grade: F

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, BE is positioned unfavorably. The stock is currently trading 44.4% below its 52-week high of $23.38.

Looking at the past year, the stock has grown more than 245% due to countries around the globe calling for immediate and necessary shifts to hydrogen and better forms of energy. The top-line has grown at a CAGR of 33% in the past three years, however, the company is still unprofitable and has consistently reported losses in each quarter during the same period.

BE’s weak price momentum can also be traced to the actions of the Canada Pension Plan (CPP) Investment Board, which exited its entire position of 12.3 million shares in the company on October 15th. On October 2nd, Morgan Stanley (MS) offered a large block of 9.2 million BE shares on the open market. The seller of the stake wasn’t disclosed. Hence, two large institutional blocks recently came to the market.

Peer Grade: D

BE is currently rated #41 out of 58 stocks in the Industrial – Equipment industry. Other popular stocks in the group are Plug Power, Inc. (PLUG), Ballard Power Systems (BLDP), and FuelCell Energy Inc. (FCEL). While FCEL has lost 14.3% on a year-to-date basis, PLUG and BLPD have gained 389.6% and 113.8%, respectively, over this period.  

Industry Rank: B

BE is part of the StockNews.com Industrial – Equipment industry, which is ranked #34 out of the 123 industries. The companies in this industry offer precision parts, products, and systems for applications serving various customers in end-markets. Demand is driven by business and industrial activity, particularly in non-residential construction. The profitability of individual companies depends on the merchandising mix and cost of financing rental inventory.

Overall POWR Rating: D (Sell)

Overall, BE is rated a “Sell” due to its weak past performance, lack of confidence of institutional investors, continued financial losses, and weak price momentum, as determined by the four components of our overall POWR Rating.

Bottom Line

BE’s platform technology is well-positioned for a variety of applications. If the Democratic candidate Biden becomes the next US president, renewable energy space will get significant attention and BE will be one of the beneficiaries. However, producers and consumers are looking for not just cleaner but cheaper sources of energy. Though there are green advantages to using hydrogen instead of oil, ultimately, cost plays a big role, and declining oil price is not positive news for BE.

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BE shares were trading at $14.28 per share on Tuesday afternoon, up $1.29 (+9.93%). Year-to-date, BE has gained 91.16%, versus a 5.69% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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