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Bear of the Day: Bloom Energy (BE)

·4 min read

Bloom Energy (BE) is a Zacks Rank #5 (Strong Sell) that generates and distributes renewable energy. The company designs, manufactures, and sells solid-oxide fuel cell systems for on-site power generation in the United States, Japan, China, India, and the Republic of Korea.

After earnings took the stock almost 50% off lows, investors need to consider taking profits as the valuations start to get high.

About the Company

Bloom is headquartered in San Jose, CA and employs over 1,3000 people. The company was founded in 2006 and serves hospitals, healthcare companies, retailers, and data centers

JKS is valued at $4.5 billion and investors should be concerned with the valuation. The company holds a Zacks Style Score of “F” in both Value and Growth.

Q1 Earnings

The company reported earnings back in May with a slight beat on the bottom line, but a miss on revenues. Q1 EPS came in at -$0.07 v the -$0.08 expected, while revenues came at $194 million v the $203 million expected.

The company affirmed their FY21 revenue outlook, seeing a wide range of $950-$1.0B v the $978 million expected. The company continues to grow revenues and increase margins, but estimates are ticking lower.

Estimates

Over the last sixty days, estimates have slipped for the upcoming quarters. For the current quarter, analysts have dropped their numbers to -$0.09 from -$0.08. For the next quarter, numbers have fallen from -$0.04 to -$0.05, or 20%.

Despite the miss and analysts dropping expectations, the stock has rallied, moving from $20 to almost $28.

Bloom Energy Corporation Price and Consensus

Bloom Energy Corporation Price and Consensus
Bloom Energy Corporation Price and Consensus

Bloom Energy Corporation price-consensus-chart | Bloom Energy Corporation Quote

Should Investors Sell the Rally?

Bloom is improving margins, reducing costs and expanding its portfolio. However, the benefits of this might take longer than investors want as demand is not where it needs to be to justify the valuation.

So after the almost 50% rally of the recent lows, investors might want to take profits and let this story play out on its own.

Technical Take

BE was surging earlier in the year and made a high of $44.95. However, an earnings report back in February brought a sense of fundamental reality and the stock plummeted back down to $25.

Since the drop, the stock has been sideways, but also flushed out some weaker players under the $20 level. Since earnings back in May, the stock has rallied, almost printing the $30 level.

The 200-day is rising, which is good. But if this level fails to hold at $25.50, expect a quick drop to $24.25, where the 50-day resides. From there, if the 50-day sees no defense, the stock could challenge 2020 lows

In Summary

Alternative energy is a challenging sector and very volatile. Bulls have to be confident in the story and Bloom just isn’t there yet. Investors should consider taking profits on the way up and looking to other names that are looking fundamentally better.

Texas Pacific Land (TPL) is a Zacks Rank #2 (Hold) that might better suit investors looking for an investment in this area.


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