Contemplating an Investment in Bloom Energy Shares with its Current Price of $28?
In the era of escalating AI advancements, the necessity for dependable energy sources to power data centers is more pressing than ever. Countless enterprises are on the hunt for sustainable energy alternatives to meet their soaring energy needs, and that's where Bloom Energy comes into play. This innovative company, with its cutting-edge fuel cell technology, is perfectly positioned to cater to today's technology giants, not just in the distant future.
Bloom Energy recently secured a major agreement that could pave the way for more significant deals, driving an impressive 149% surge in its stock value since November. However, the stock has experienced a minor setback lately, falling 17% from its 52-week high, and currently trading below $28 per share. But is it a worthwhile investment today?
Meeting the Demand for Energy with Bloom Energy
The swift adoption of AI technology has led to a notable increase in energy requirements from the data centers that support this software. Goldman Sachs predicts that the power demand from data centers will surge at an annualized rate of 15% through 2030, making them responsible for approximately 8% of US total power consumption.
With data centers growing ever more energy-dependent, technology companies are seeking effective solutions to accommodate their rising energy consumption. In September, Microsoft entered into a 20-year power purchase agreement with Constellation Energy to bring back online Three Mile Island's nuclear reactor.
Fuel cells also contribute to tackling this rising need. For instance, Bloom's solid oxide fuel cell technology efficiently converts renewable fuel sources like biogas and hydrogen, thereby generating low-carbon, dependable energy through microgrid solutions for clients.
Bloom Energy holds a considerable advantage over some other emerging energy companies due to the readiness of its technology for deployment today. It can be installed for clients within 50 days, supplementing energy supplied by the power grid. The technology enables data centers to operate independently as "islands," reducing their dependence on the electric grid, making it particularly appealing for energy-intensive AI operations.
Bloom Energy's Recent Progress
Bloom Energy has struggled financially since its public launch in 2018, incurring losses of almost $130 million against overall revenues of $1.25 billion. However, the company has managed to enhance its profit margins and secure sizeable clients, contributing to significant progress.
In May, Bloom Energy announced a power purchase agreement with Intel to install additional Energy Server megawatts at its high-performance computing data center in Santa Clara, CA. In July, it collaborated with Nvidia-backed AI hyperscaler CoreWeave to generate on-site power for its Illinois data center.
The highlight of Bloom Energy's advancements came in November with the signing of an agreement with power company American Electric to purchase up to 1 gigawatt (GW) of solid-state fuel cells. Evercore described this as a "major win" for Bloom, while Morningstar referred to it as "a potential game changer."
Following the deal, analysts at Morgan Stanley boosted their EBITDA estimates for Bloom by 35% for 2025 and 62% for 2026, expecting the order to be fulfilled over the next four years.
Is Bloom a Buy?
As the demand for energy escalates, Bloom Energy holds great allure since its products are ready for immediate deployment. Opposed to traditional nuclear power plants that require years to construct and come online and small modular nuclear reactors that may not become commercially viable until the 2030s, Bloom Energy stands out for its prompt, scalable energy solutions.
Bloom Energy's strategic partnership with American Electric will help it demonstrate its capability to deliver rapid energy solutions, placing it in an advantageous position with a major utility client that anticipates a 20% annual growth in its commercial load over the next three years.
Analysts expect Bloom to report earnings of $0.06 per share in 2024, which could potentially increase to $0.43 per share in 2025. However, there are potential risks associated with new deals failing to materialize or the American Electric Power agreement not meeting expectations. As a result, this emerging energy stock might not be suitable for conservative investors. Nonetheless, Bloom Energy has made remarkable progress and seeks to build further momentum in 2025, making it an appealing growth stock option for long-term investors with a risk tolerance.
Given the increasing demand for energy due to the proliferation of AI technologies, investing in companies like Bloom Energy that offer efficient and reliable energy solutions is a strategic finance move. Bloom Energy's recent agreement with American Electric, which could potentially yield up to 1 GW of solid-state fuel cells, has significantly boosted its stock value, making it an attractive investment opportunity in the finance sector.