Bloom Energy: The stock market has switched gears
My number one in this segment was and remains Bloom Energy, even if the share price, despite the recent price gains, does not come close to reflecting the prospects. In the third quarter, the turnover was able to rise nearly 37 percent to over 400 million USD. There is much to suggest that the current fourth quarter will also show a strong upward trend – 1.4 to 1.5 billion USD should be the total for 2023. The non-GAAP profit margin was able to rise in the quarter an impressive 12.4 percent from the previous year to 31.6 percent. Non-GAAP profit in the third quarter amounted to 51.8 million USD, so an improvement of 80.3 million USD compared to a non-GAAP loss of 28.5 million USD in Q3 2022. I am concentrating here on the non-GAAP figures, as these exclude special factors and one-off effects.
In year 2024, Bloom should not only be cash flow positive, but also operationally profitable. The cash on hand of 650 million USD at the end of the third quarter must also be seen from the aspect that material inventories with value of over 400 million USD (capital employed) were significantly increased, so existing orders can be processed quickly and, because of the parts on hand, there are no supply chain problems.
Production sites centrally consolidated
Bloom is concentrating fully and completely on the Fremont location, because production there is highly efficiently automated (state-of-the-art facility). As a result, nearly 100 employees were let go (overhead in Sunnyvale), which was interpreted to mean that the company was not doing well (comments in chat rooms and analyses) – by no means the correct interpretation, because higher automation saves on costs. Everything has an upside and a downside.
Exciting is the outlook of CEO K. R. Sridhar: The enormously increasing energy demand – for example for AI – will be drive the business of Bloom and its energy servers, because it’s not just about the quantity of clean energy, but also about its permanent availability (24/7) and security. Power-to-heat models enable the simultaneous use of generated energy for electricity and heat, as the energy generated in the process and its waste heat can be used immediately for heating (process heat) and also for cooling. The perfect cycle. As the electricity grids are reaching the limits of their capacity, island solutions like that of Bloom are coming in the focus of many businesses. While natural gas is still being used for the time being, it will successively be replaced by hydrogen in its many colors.
In parallel, the company’s own carbon capture technology will reduce the CO2 footprint. Here Sridhar also makes interesting allusions to the potential of its own high-temperature SOEC electrolysis. All the same, Bloom with its electrolysis technology is participating in four out of the seven hydrogen hub projects of the Biden administration (seven billion USD investment in seven H2 production centers spread across the USA). The business with the electrolysis will start in 2024, but will then make a real contribution to the company’s growth starting 2025. CEO Sridhar has said, “Bloom Energy is executing at a high level on innovation and growth.” Summary: The stock market story is round. In year 2024, we should see again prices over 30 USD, if the company’s forecasts are met.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
Author: Written by Sven Jösting, December 15th, 2023
