Bloom Energy gets thumbs-up from Wall Street following July IPO
Bloom Energy Corp.’s stock run-up after its initial public offering has set Wall Street on a cautiously optimistic view of the clean-energy company.
Several investment banks have started covering Bloom Energy at the end of the company’s post-IPO quiet period. Analysts on average have a $25.71 price target on Bloom Energy stock BE, +13.32% , according to FactSet, which compiled estimates from nine analysts.
That represents a 4% upside over Tuesday prices, and 71% from the share’s IPO price.
The analysts collectively rate Bloom a buy, and expect Bloom to report adjusted losses at least through the second quarter of 2019 and no GAAP profit for years to come. Bloom makes fuel-cell stationary servers that convert gas into electricity, a process it says is cleaner and more reliable than others.
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The company priced its initial public offering at $15 a share in late July, raising $270 million, and the stock skyrocketed 67% to $25 a share in the first day of trading.
After the post-IPO rally, current share price “captures a fair balance” between potential risks and upside from sales growth, analysts at Credit Suisse said in a note this week.
Bloom also faces competition from possible declines in utility rates as more renewables are incorporated, and potential disruptions in scandium, a rare-earth element it uses as an electrolyte, the Credit Suisse analysts said in the note.
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Bloom enjoys “impressive growth prospects” but there’s no near-term catalyst for the shares, analysts at Cowen said also in a note. They rated Bloom Energy at a neutral with a price target of $24.
“To become more constructive, we want to see execution on initiatives critical to the longer-term success of the business beyond FY19,” the Cowen analysts said.
Bloom has made inroads in lowering product costs, going for additional cost reductions, and working on reliability, which “should help to further expand the company’s addressable market as today Bloom Energy fills a more niche application,” they said.
Analysts at Morgan Stanley were more optimistic about Bloom, saying that the company was “a true disrupter.”
“We see a path to significant margin expansion and cash flow generation that is not yet reflected in the stock,” they said, rating the stock their equivalent of buy with a price target of $30.
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Bloom “has a multiyear lead over potential competitive products given its technological advances, cost reductions, high barriers to entry, and very limited set of commercial competitors,” the Morgan Stanley analysts said.
In addition, its list of “blue chip” customers are bound to increase their own footprint and expand use of Bloom’s products.
“We see a long runway for growth ahead, and don’t expect market demand to be a limiting factor for Bloom in the foreseeable future. This very large market opportunity will continue to grow for Bloom as its product costs decline and utility bills continue to rise,” the Morgan Stanley analysts said.
Analysts at KeyBanc Capital Markets also rated Bloom Energy their equivalent of buy, saying they viewed Bloom Energy as “being in nascent phases of adoption as a practical, low-emissions power solution” for commercial and industrial customers that are becoming “increasingly emissions conscious and are looking for more weather-resilient energy solutions.”
The KeyBanc analysts have a $27 price target on Bloom shares. The company will be able to sustain a 40% volume sales growth year-over-year, “translating into high double-digit and accelerating revenue growth into 2021,” they said.
Bloom earlier this month reported a narrower quarterly loss, saying it had lost an adjusted 27 cents in the second quarter, compared with an adjusted loss of 68 cents a year ago. Revenue rose to $169 million, from $87 million a year ago.
Read commentary: In just one week as a public company, Bloom Energy has squandered its credibility
The company makes fuel cells that are used in stationary power-generation servers that are about half the size of a shipping container. The servers convert natural gas or biogas into electricity through an electrochemical reaction.
In its prospectus pre-IPO, Bloom disclosed that business is concentrated on few customers, and that federal tax credits on alternative energy systems have been essential to its business, as the credits and other incentives offset the price of the servers.
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