Solid oxide fuel cell technology provider Bloom Energy Corporation’s (BE) shares gained 373.9% over the past year on growing optimism about the prospects of renewable energy amid rising climate change concerns. However, BE is currently trading 43.8% below its 52-week high of $44.95, which it hit on February 8. The stock was affected by a broader equity market sell-off that happened in-part in response to rising Treasury yields. The company’s reported fiscal fourth-quarter loss was also a factor in its share price decline.
Through Bloom Energy Server, BE converts standard low-pressure natural gas, biogas, or hydrogen into electricity through an electrochemical process without combustion. But with more players entering the renewable energy space, BE faces stiff competition from the likes of Plug Power, Inc. (PLUG) and FuelCell Energy, Inc. (FCEL).
While BE has gained 40.6% over the past six months, PLUG and FCEL have gained 153.8% and 513.6%, respectively. And since wind and solar power have become much cheaper in recent years, hydrogen fuel cell technology might have a difficult time establishing itself as a leading alternative. BE is currently trading lower than its 50-day and 200-day moving averages of $29.65 and $25.81, respectively, indicating that the stock is in a downtrend. So, BE’s current financials and near-terms prospects don’t justify its lofty valuation.
Here’s what we think could shape BE’s performance in the near term:
Weak Financials
For the fourth quarter, ended December 31, BE’s top line grew 16.8% year-over-year to $249.39 million. But this was driven primarily by a 16.6% year-over-year increase in acceptances. The company’s loss from operations was $4.52 million for the quarter and its net loss was $27.14 million. Also, its adjusted loss per share for the fourth quarter was $0.08 versus an adjusted loss per share of $0.04 in the third quarter of 2020 (ended September 30, 2020). BE also ended its fiscal year 2020 with $527.10 million of debt.
Expensive Valuation
In terms of forward price/sales ratio, BE’s 4.10x is 162.8% higher than the industry average 1.56x. In terms of forward enterprise value/sales ratio, the stock’s 5.38x is also 169% higher than the industry average 2.00x. And its forward price-to-book ratio of 9.44x is higher than the industry average 3.10x.
POWR Ratings Reflect Bleak Outlook
BE has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. BE has a D grade for Value, which is consistent with its significantly higher-than-industry valuation ratios.
It also has a D grade for Sentiment, which is justified given the not-so-favorable analyst sentiment. BE has a D grade for Quality. This is in sync with its negative trailing-12-month return on total assets versus the industry average 3.3%.
We have also graded BE for Growth, Momentum, and Stability. Get all of BE’s ratings here.
BE is ranked #75 of 90 stocks in the Industrial – Equipment industry.
Better than BE: Click here to access several other top-rated stocks in the same industry.
Bottom Line
BE has retreated 11.1% over the past three months and 11.5% over the past month. Given that the company is incurring losses and its EPS is expected to remain negative in its fiscal 2021, its sky-high valuation doesn’t seem to be justified. So, we think it is better to avoid the stock now and wait until the company turns profitable.
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BE shares were trading at $27.08 per share on Wednesday morning, up $1.82 (+7.21%). Year-to-date, BE has declined -5.51%, versus a 6.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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