Bloom Energy – billion-dollar deal triggers price explosion

Bloom-Server, © Bloom
© Bloom

Bloom Energy gained its South Korean customer and corporate partner of many years, SK ecoplant, as a shareholder and, thanks to the existing good working relationship, has even bagged a USD 4.5 billion order – for hardware and software and also service revenue – for 500 megawatts for the time being. This order should only be the start though and so ought to have further potential. SK ecoplant, part of the SK Group, is the largest energy corporation in South Korea and is planning to invest multiple billions in fuel cells and hydrogen, said to be about USD 25 billion.

This investment fits with South Korea’s strategy to become a global leader in this area. By 2040, it plans to have over 6 million hydrogen vehicles on its roads. The stated aim is 15 gigawatts via hydrogen and 1,200 hydrogen refueling stations also by 2040. SK alone is planning to equip 1,600 of its more than 3,000 filling stations with hydrogen fuel pumps. Since SK is also active in many other markets, Bloom may envisage many other great developments.

HOW

Both companies want, for example, to bring two research laboratories online – in the USA and South Korea – that can improve and expand their own expertise alongside external partners using new business models. Bloom’s high-performance electrolyzer technology, due to be launched on the market from 2022, also plays a critical role in this.

SK ecoplant will also become the biggest single shareholder in Bloom Energy, holding up to 15 percent of the capital stock. The first USD 255 million tranche of the planned and reported USD 500 million investment flowed in during December 2021.

The upshot of all these developments was an increase in the Bloom share price from USD 18 to USD 37 although that retreated back to USD 24. An ideal price again for new and additional acquisitions. We might even be seeing a 50 percent degree of reaction here, as often occurs after a very large price increase where half of the price gain evaporates again as day traders, i.e., very short-term investors, secure their gains. After that though, the trend for the future is likely to be up again, especially if the news is decidedly positive.

Short sellers will have tracked and exploited this trend too. At the time the SK deal was announced, they had still short sold more than 18.4 million shares, with the short interest then decreasing to 14.4 million shares, hence obtaining cover. In my view, the outlook could not be better.

Figures and outlook

The third quarter turned out to be reasonable on various grounds, with revenue up 11.4 percent to USD 207.2 million. However, revenue shifted by USD 20 million in the fourth quarter although needing to be adjusted by USD 14.2 million for accounting reasons to recognize nonrecurring revenue recorded in the third quarter of 2020. The non-GAAP loss was USD 22.9 million in the third quarter of 2021. The forecast is more important though, with Bloom massively expanding the capacity of its 5.0 and 7.5 energy servers and electrolyzers. […]

… Read this article to the end in the latest H2-International

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.

Written by Sven Jösting December 7, 2021

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