Why Bloom Energy Surged Today
Shares of fuel cell manufacturer Bloom Energy (NYSE: BE) were on the rise today, up 10.1% as of 1 p.m. ET.
There wasn't too much company-specific news today. However, Bloom was highlighted as a top pick in the past weekend's edition of Barron's Magazine as a stock poised to benefit from increasing energy demand resulting from the AI data center buildout.
Now potentially regarded as an esteemed "AI beneficiary," Bloom's stock is rising days after the article and one day before AI chip juggernaut Nvidia's earnings report tomorrow.
Bloom's innovative fuel cell tech can help fix the missing energy problem
In last weekend's Barron's, Stephen Byrd, the head of clean technology research at Morgan Stanley, highlighted Bloom as one of his top five energy stocks to benefit from the AI data center buildout.
The Barron's roundtable was focused on the increased demands for electricity from energy-hungry AI data centers. As a result, electricity demand in the U.S. is expected to accelerate from flattish, which it has been over the past few decades, to around 2% growth, given the needs of AI data centers and the electrification of the auto industry.
Given that U.S. electricity generation is somewhat constrained both by the amount of installed clean energy capacity as well as the slow buildout of the next-generation electrical grid, certain companies that can deliver clean power from existing sources or grid-independent sources are therefore poised to benefit.
Byrd highlighted Bloom's potential to ink large contracts with data center operators seeking grid-independent power sources. Bloom's fuel cell-based energy servers, about the size of refrigerators, have unique technology that can transform fuel into energy without combustion, using either hydrogen or biogas for zero-carbon emissions, or natural gas, which has a 50% lower carbon emission profile with Bloom's servers relative to grid-sourced natural gas.
But Bloom has in fact already inked partnerships with several high-profile cloud data center operators and large technology companies. Its most recent deal was a power purchase agreement with Intel, announced on May 9, which will result in "the single largest fuel cell-powered high-performance computing data center in Silicon Valley."
Is Bloom a buy?
Bloom may not seem like a star grower; last quarter, revenue actually declined by 14.5%, and the company had an adjusted (non-GAAP) operating loss of $30.7 million.
However, its sales can be lumpy, given the nature of its hardware business. Even on the back of a "weak" quarter, management still forecast revenue between $1.4 billion and $1.6 billion this year, which would be an increase over 2023's $1.334 billion. Moreover, the company sees adjusted operating income flipping to positive $75 million to $100 million in 2024 as well.
That doesn't make Bloom a cheap stock, as it still has a $3.3 billion market cap after today's surge. However, the company's technology appears to be catching on with AI companies. That makes it a growth stock to watch.
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Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
Why Bloom Energy Surged Today was originally published by The Motley Fool
