As artificial intelligence (AI) advances and its applications expand across various sectors, including healthcare, finance, transportation, and manufacturing, the need for reliable energy solutions is becoming increasingly urgent. Companies are actively seeking scalable renewable energy sources to address this challenge and support their growing requirements.
This is where Bloom Energy (BE 1.53%) has an opportunity. With its innovative fuel cell technology, Bloom is positioned as an energy provider capable of meeting technology companies' energy needs today -- not five or ten years down the road.
The company secured a massive agreement that could pave the way for more significant deals, and the stock has surged an impressive 149% since November. Recently, the stock has fallen 17% from its 52-week high and trades below $28 per share. Is it a buy today? Let's explore where it is and the long-term investment opportunity.
How Bloom Energy can meet the growing demand for energy today
Artificial intelligence is reshaping our lives, and the quick uptake of this technology has led to a significant demand for energy in the data centers that support these algorithms. According to Goldman Sachs, data center power demand is anticipated to increase by about 15% annually through 2030. As a result, data centers could account for roughly 8% of the total power consumption in the United States.
To address the growing demand for clean and reliable energy, technology companies are actively seeking solutions to accommodate their data centers' increasing energy consumption. In September, Microsoft attracted attention by entering into a 20-year power purchase agreement with Constellation Energy Corporation, which includes the revival of Three Mile Island Unit 1.
Another source of energy that could meet this growing need is fuel cells. For instance, Bloom's solid oxide fuel cell technology efficiently converts renewable fuel sources like biogas, natural gas, and hydrogen without combustion. It provides dependable, low-carbon energy and microgrid solutions for clients needing resilient power.
A significant advantage of Bloom compared to other emerging energy companies is that its technology is ready to deploy today. It can be implemented in just 50 days and complement the energy supplied by the power grid. Furthermore, this technology allows data centers to function independently as "islands," eliminating dependence on the electric grid—making it especially attractive to energy-intensive AI businesses.
Bloom has made serious headway in the past year
Since its public debut in 2018, Bloom Energy has struggled financially. In the last year, the company incurred losses of nearly $130 million against a total revenue of $1.25 billion. Although it has improved its margins, securing additional large clients is essential to further validate its offerings and move toward positive cash flow. The company has done just that over the past year.
Last May, the company announced a power purchase agreement with Intel to install additional megawatts of its fuel cell-based Energy Server at Intel's high-performance computing data center in Santa Clara. In July, it partnered with the Nvidia-backed AI hyperscaler CoreWeave to generate on-site power for its high-performance data center in Illinois.
Image source: Bloom Energy.
In November, American Electric Power Company signed an agreement with Bloom Energy to purchase up to 1 gigawatt (GW) of solid-state fuel cells for data centers and other large energy users. American Electric plans to utilize these fuel cells for commercial and industrial applications. Evercore, an investment bank, described this development as a "big win" for the company, while Morningstar called the deal "a potential game changer for Bloom."
Following the deal, analysts at Morgan Stanley raised their EBITDA estimates for Bloom by 35% for this year and 62% for the following year, anticipating that the order will be completed over the next four years.
Is it a buy?
As energy demand grows, Bloom Energy is particularly appealing because its product is ready to deploy today. Contrast this with nuclear energy, which takes years to come online, and small modular reactors (SMR), which may not be operational until the 2030s.
Bloom Energy is making solid progress, and its partnership with American Electric is a big win that will help it showcase its ability to provide quick, scalable energy solutions. It also puts Bloom in a prime position with American Electric, which forecasts a 20% annual growth in its commercial load over the next three years.
Analysts covering the stock project Bloom could generate an earnings per share of $0.06 in 2024, which could grow to $0.43 per share in in 2025.
There is a risk if new deals fail to materialize or if its deal with American Electric Power, which isn't a firm order, fails to deliver on expectations. For that reason, this up-and-coming energy stock isn't suitable for conservative investors seeking capital preservation. That said, the company has made solid progress and will look to build on its momentum in 2025, making it a good growth stock for long-term investors willing to tolerate the risk.
