Bloom Energy has an exciting technology offering, but there is still a lot of risk involved in owning this hydrogen energy upstart.
Bloom Energy (BE -3.31%) is a story stock. The story is very interesting, but in order to justify buying the stock, you have to really believe the story. All other investors will probably be better off waiting for the company to hit one key milestone before even considering it. Here’s a look at why you might want to buy Bloom Energy, and why most investors won’t.
Bloom Energy’s got a really cool product
Bloom Energy essentially makes two products, the Bloom Energy Server and the Bloom Electrolyzer. The Bloom Energy Server is a flexible fuel cell that can be powered with biogas, hydrogen, natural gas, or a blend of fuels. It is modular, so it can be implemented at varying scales. And it is modest in size, so it is relatively easy to install and move around, if needed.
The company pitches its product as a microgrid that can be run anywhere and that can remain operational even when more traditional power sources fail. The Bloom Energy Electrolyzer produces hydrogen using electricity and can help companies reduce their emission profile by converting their dirty emissions into hydrogen. It is a newer technology and is less developed than the company’s energy server offering.
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The opportunity set here is material. For example, the Bloom Energy Server could be used to provide power to areas that are not connected to the traditional electrical grid. It could be used as a backup power source for vital infrastructure and service assets. It can be quickly deployed to power new development if building the needed grid infrastructure would take years to complete.
One of the company’s big selling points today is the ability to power data centers at a time when utilities are struggling to keep up with the massive power demands of the technology. The Bloom Electrolyzer, meanwhile, can help “dirty” industries get closer to zero carbon emissions by turning their waste into hydrogen that can be used for power.
All in, Bloom Energy’s technology looks like an attractive way to help the world transition from dirtier fuels to cleaner ones like solar and wind. And it is a technology that is available right now, noting that Bloom Energy generated nearly $336 million in revenue in the second quarter of 2024. Investors with an ESG focus and a glass-half-full mindset might find Bloom Energy attractive enough to buy.
The not so small fly in Bloom Energy’s ointment
There’s one very big problem for Bloom Energy, however, and it is something that should worry glass-half-empty investors. Despite the fact that Bloom Energy has customers willing to buy its products, it doesn’t actually make a profit. In the risks section of the company’s 10-K, it notes, “We have incurred significant losses in the past and we may not be profitable in future periods.”
It then goes on to explain that it intends to keep expanding its business, which will require even more spending. This is, essentially, an unprofitable start-up company.
But it is interesting to examine the numbers just a little bit. The company’s revenue in the second quarter of 2024 totaled $336 million while its cost of revenue came in at $267 million, for a gross profit of nearly $69 million. That’s a good start, though it is notable that installation services and maintenance services are both unprofitable for the company. It basically makes most of its money from selling physical energy systems.
Things get less exciting from that point. Research and development expenses tallied up to $37 million, sales and marketing expenses were nearly $18 million, and general and administrative costs came in at about $36 million. Add all of those items up, none of which the company can operate without, and Bloom Energy’s operating costs were roughly $92 million. That leads to a net loss of $23 million. And that’s before you add in interest costs on the roughly $1.1 billion of debt it is carrying on its balance sheet.
BE EPS Diluted (Quarterly) data by YCharts
All in, the company lost $0.27 per share in the second quarter, yet another stanza to the ongoing red ink the company has generated so far in its relatively short public life, despite revenue trending generally higher over time. Given that management is openly telling investors that the losses are likely to continue, this stock is not going to be a great fit for anyone who isn’t an aggressive investor interested in the clean energy revolution.
Bloom Energy has an exciting story that’s worth watching
So, for most investors, Bloom Energy probably won’t be worth buying — at least not today. But the technology it provides is very interesting, particularly given its flexibility and clean energy bonafides. It is worth keeping tabs on this company with the potential for reconsidering an investment when — perhaps if — it turns profitable. That said, a select few might believe so strongly in the potential of the company’s product that they are willing to take on the risk of buying an upstart and money-losing company. Just go in with your eyes open to the risks if you do.