Promising Outlook for Bloom Energy, According to Morgan Stanley
Morgan Stanley has identified several positive factors that could propel Bloom Energy forward. The bank has named the stock a top pick and reiterated its overweight rating on shares. With a maintained price target of $29, there is potential for shares to surge by 92% from their Tuesday closing price. Analyst Andrew Percoco highlights Bloom Energy as their top pick in clean tech, emphasizing its role as a beneficiary of various key themes.
Growing Value Proposition of Distributed Energy
Percoco points out the increasing value proposition of on-site electrical generation, also known as distributed energy. Bloom Energy stands to benefit from this trend. Additionally, the fuel cell maker is expected to gain momentum due to rising grid instability and grid capacity limitations.
Margin Expansion and Future Growth
Percoco believes that the growing demand for Bloom Energy's fuel cell technology, coupled with its consistent reduction of product costs by 10%-15% annually, will drive significant margin expansion and free cash flow generation in the years ahead. These positive factors are not yet reflected in the company's current valuation. Percoco calculates that shares are trading at a 37% discount compared to its hydrogen peers based on 2025 enterprise value-to-sales figures.
Upcoming Catalysts for Revenue Expectations
In addition to the potential margin expansion, Percoco forecasts that the clean hydrogen tax credit from the Inflation Reduction Act will serve as another catalyst for consensus revenue expectations from 2025 to 2030. These factors contribute to the firm's estimation that shares could surge over 75% in the bull case, especially if Bloom Energy capitalizes on "explosive growth" through consistent cost-cutting measures and a rise in electric bills.
In premarket trading, shares of Bloom Energy increased by 1.5% on Wednesday. However, the stock has experienced a decline of 21% in 2023. It is important to note that these figures are subject to market fluctuations and should be considered in the context of broader market trends.
—CNBC's Michael Bloom contributed to this report.
Implications for New Businesses
The promising outlook for Bloom Energy, as highlighted by Morgan Stanley, provides valuable insights for new businesses, particularly those in the clean tech sector. The growing value proposition of distributed energy and the potential for significant margin expansion indicate a favorable market environment for businesses in this field.
Opportunities in Clean Tech
New businesses can leverage the increasing demand for on-site electrical generation and fuel cell technology. By focusing on product cost reduction and capitalizing on opportunities like the clean hydrogen tax credit, new businesses can drive growth and profitability.
In conclusion, the positive outlook for Bloom Energy presents a compelling case for the potential of the clean tech sector. New businesses can learn from Bloom Energy's strategies and the market trends highlighted by Morgan Stanley. By aligning with these trends and capitalizing on emerging opportunities, new businesses can position themselves for success in the clean tech sector. The potential for significant growth in this sector underscores the importance of innovation and adaptability in driving business success.