On Wednesday, Bloom Energy Corp . (NYSE:BE) experienced a shift in its stock outlook as HSBC moved its rating from Buy to Hold, albeit with an increased price target of $24.50, up from the previous $17.20. The adjustment reflects a nuanced view of the company's prospects amid its manufacturing capacity and financial considerations.
The HSBC analyst noted that while Bloom Energy has sufficient excess manufacturing capacity for the short term, there may be a need to expand its Fremont facility's capacity from approximately 750 megawatts to gigawatt scale by late 2025. This anticipated expansion is expected to be gradual and integrated into the existing infrastructure.
The company's working capital is projected to remain a challenge in the near term. Despite this, the analyst forecasts that Bloom will generate positive free cash flow in 2026, a year earlier than previously expected. This optimistic financial outlook is a factor in the raised price target.
The new price target of $24.50 is derived from a discounted cash flow (DCF) analysis, which now includes a higher long-term growth rate. This adjustment is based on the anticipation of increased demand from AI data centers, which is expected to provide a longer and stronger tailwind for the company's growth.
Despite the positive aspects of Bloom Energy's business, including its involvement with AI data center demand and hydrogen, the analyst believes that the current stock valuation is fair.
This assessment comes after the stock's recent strong performance, which seems to have already reflected investor expectations. As a result, the modest upside potential of 3.2% warranted the downgrade to a Hold rating.
In other recent news, Bloom Energy has been the subject of significant analyst attention. RBC (TSX:RY) Capital Markets raised its price target for Bloom Energy to $28, maintaining an Outperform rating following a 1 GW framework agreement with American Electric Power (NASDAQ:AEP).
BMO (TSX:BMO) Capital Markets also increased its price target to $19.50, keeping a Market Perform rating. Piper Sandler upgraded Bloom Energy's stock rating from Neutral to Overweight, doubling the price target to $20.
These updates come in the wake of recent developments. Bloom Energy reported third-quarter revenues of $330 million and earnings before interest, taxes, depreciation, and amortization (EBITDA) of $21 million. Despite falling short of expectations, the company maintained its full-year revenue and gross margin forecasts.
Bloom Energy also secured three new orders, including an 80 megawatt project in South Korea, indicating a broader interest in their fuel cell technology. The company is increasing its manufacturing capacity in Fremont in response to anticipated demand.
Analysts from firms such as Susquehanna and Piper Sandler have expressed confidence in Bloom Energy's growth trajectory following these developments. However, they also emphasize the need for the company to deliver on its promises in the upcoming fourth quarter results.
InvestingPro Insights
Bloom Energy's recent stock performance aligns with several InvestingPro metrics and tips. The company's stock has shown remarkable returns, with a 74.63% increase in the past week and a 133.76% surge over the last month. This rapid growth supports the InvestingPro Tip that suggests the stock is currently in overbought territory, as indicated by its RSI.
The analyst's projection of positive free cash flow by 2026 is particularly interesting when considering that Bloom Energy is not currently profitable, according to InvestingPro data. However, an InvestingPro Tip reveals that analysts expect the company to become profitable this year, which could be a catalyst for future growth.
While the HSBC analyst notes working capital challenges, InvestingPro data shows that Bloom Energy's liquid assets exceed its short-term obligations, indicating a degree of financial stability. Additionally, the company operates with a moderate level of debt, which may provide flexibility as it considers expanding its manufacturing capacity.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Bloom Energy, providing a deeper understanding of the company's financial health and market position.
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