Bloom Energy rises after analyst updates

Fuel-cell-based power provider Bloom Energy jumped Monday after analysts at Bank of America and RBC Capital published somewhat contradictory commentary on the shares.

In its note, BofA said the company’s “new Brookfield partnership adds a blue-chip counterparty and reinforces its position at the center of the AI-driven power-resiliency build-out.”

But BofA analysts still rate the stock an “underperform,” citing “aggressive market assumptions” about the rate at which its recent announcements of partnerships and memorandums of understanding (MOUs) with potential data center clients, including Oracle, can be converted into actual revenue that justify the market’s assumptions about the coming years. They wrote:

“Bloom Energy would need to convert nearly all announced MOUs, accelerate project execution, and sustain 20%+ incremental margins, a steep execution curve for a company that has only recently achieved low-double-digit EBITDA margins. To reach 2030 levels, the company would need to achieve nearly double those deployments annually. The current valuation, in our view, already reflects this ‘blue sky’ scenario.”

And while BofA did raise its price target for the shares to $26 from $24, that’s roughly 80% below where the stock now trades.

Analysts at RBC, however, were much more sanguine about the prospects for the company. In a note published over the weekend, they raised their price target to $123 from $75, suggesting that the market seems to be pricing only a relatively modest part of the potential opportunity for Bloom represented by so-called behind-the-meter (BTM) data centers. (Those are data centers that have their own dedicated on-site power generation.) They wrote:

“We believe the upside opportunity continues to skew favorably on a growing BTM datacenter opportunity that we believe is still in the early stages. We acknowledge the competitive dynamics, but point to the recent partnership announcement with Brookfield as another proof point for the competitiveness of BE’s solution. We believe shares are priced for an incremental capacity increase which we think is supported by a large and growing TAM [total addressable market] opportunity.”