Shares of Bloom Energy Corporation (NYSE: BE) are up more than 17% in the last week. The immediate catalyst is a timely analyst rating from Morgan Stanley (NYSE: MS) that drew attention to potentially bullish expansion news for the company. This article will take a closer look at what the analysts are seeing and if this is a good time to consider taking a position in BE stock.
The Rush to Find Clean Energy Solutions is Fueling Expansion
Bloom Energy is frequently lumped with other hydrogen fuel cell stocks like Plug Power (NASDAQ: PLUG) and FuelCell Energy (NASDAQ: FCEL). But while those companies primarily focus on hydrogen fuel cells as a means of powering vehicles, Bloom develops fuel cells for industrial applications.
Specifically, the company’s fuel cell can run on natural gas, biogas, or hydrogen, so its industrial-sized generators operate without combustion. The scalable fuel cells can also store energy and distribute AC or DC power.
In December, Bloom announced that it was delivering up to 10MW of fuel cells to Unimicron. The Taiwanese company is a chip substrate and printed circuit board maker (PCB). That will give Bloom a presence in four Asian countries.
And in giving Bloom Energy an upgrade, Morgan Stanley pointed out the company's expansion into Spain and Portugal as those countries seek to “efficiently meet their energy security needs and green hydrogen demand.”
Interpreting the Analysts
As I mentioned in the introduction, Bloom Energy got an upgrade from Morgan Stanley. The analyst firm raised the stock from equal weight to overweight with a price target of $35. Of course, the price action is a little strange because just a few days earlier, on January 6, Wells Fargo & Company (NYSE: WFC) lowered their rating for the stock from overweight to equal weight with a price target of $22.
There was a time when analysts gave a stock one of three ratings: buy, hold, or sell. After the dot-com implosion in the early 2000s, there was a demand for more transparency. Part of that transparency resulted in additional ratings: overweight, underweight, and equal weight.
When an analyst gives the stock an overweight rating it means that a particular stock is outperforming other stocks that they analyze. If an analyst covers more than one stock in a sector (as many do), this rating means that it is one of the stronger stocks in its sector.
The opposite of an overweight rating is underweight. And equal weight means that an analyst expects a stock’s performance to align with the average return of the other stocks they cover.
It's important to note that these ratings aren’t quite the same as a buy, hold or sell, but many investors take them to mean just that.
BE Stock is a Risk, But Maybe One Worth Taking
The best bull case for Bloom Energy will only happen if hydrogen becomes a significant fuel source in the next ten years. A lot still has to go right, but as the company’s expansion shows, there is a growing market for utility-scale energy storage using hydrogen fuel cells.
Meanwhile, analysts tracked by MarketBeat have a consensus price target of $29.93 which would increase 29% from the stock’s current price. That’s the expectation in the next 12 to 18 months.
Still, Bloom is not expected to deliver positive earnings until its fourth-quarter earnings for 2023. That makes it a risk-on stock in a market with a risk-off tilt. But if you believe in the company’s approach to a hydrogen-powered future, BE stock may be a risk worth taking.