Bloom Energy – a restart is in order

Bloom Energy stock rose for a good while, to around USD 14, before falling dramatically. The plunge was a result of the company’s relatively weak performance in the fourth quarter of 2019 and the same-quarter restatement of managed service agreements entered into between 2016 and the end of last year. Instead of over the duration of the contract, the revenue for managed services transactions had been recognized upfront.

But as this affected only around 10 percent of total revenue over the specified period, the impact on overall results was negligible. An analyst working for investment firm Cowen did not see the earnings restatement as a good enough reason for changing his outlook on the company.

Weak numbers but destined for growth

The results for the fourth quarter of 2019 seemed disappointing. Instead of around USD 260 million, as estimated, revenue came to USD 213.8 million, an increase of 35.8 percent year over year. Instead of turning a profit, the company incurred a net loss of USD 67.1 million, although most of it was the result of stock-based compensation, i.e., accounting losses. Despite these issues, product and install backlog increased by an impressive 43.3 percent.

Considering how much the stock has been worth lately, Bloom’s troubles have been good news for those shorting around 18 million of its shares, from a float of 70 million. But like the above-mentioned analyst, I rather want to focus on the company’s bright outlook. Bloom [NYSE: BE] now has a USD 4 billion backlog. The contract value of this backlog is USD 1.1 billion for product and installation revenue, USD 1.1 billion for revenue from new service agreements and USD 2.1 billion for revenue from agreements already in place, assuming all service contracts are renewed over the full contract term. The business also had a year-end cash balance of USD 377 million, though it wants to refinance its existing debt this year. This likely means its 6-percent convertible notes, total par value USD 289 million, will be exchanged for new notes or a long-term loan facility. In any case, the company is planning to complete the refinancing process in the first six months of 2020.

read more in H2-international May 2020

Risk warning
Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small- and mid-cap businesses, which means their stocks may experience high volatility. The information in this article is based on publicly available sources, and the views and opinions expressed herein are those of the author only. They are not to be taken as a suggestion of what stocks to buy or sell and come without any explicit or implicit guarantee or warranty. The author focuses on mid-term and long-term prospects, not short-term gains, and may own shares in the company or the companies being analyzed.

Author: Sven Jösting, March 19th, 2020

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