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Why Bloom Energy Stock Just Popped 17%

By Rich Smith - Nov 4, 2019 at 1:28PM

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Earnings day is just three days away. What if Bloom reports a profit?

What happened

Shares of energy-in-a-box pioneer Bloom Energy ( BE -5.68% ) jumped furiously in Monday trading -- up 17.2% as of 12:45 p.m. EST, and on no apparent catalyst for the surge.

So what

So what's the explanation for this sudden enthusiasm over Bloom Energy stock? If I had to make a guess, I'd say it's that this isn't "enthusiasm" at all but rather short-sellers having an attack of nerves.

Bloom Energy, after all, has been very good to short-sellers of late. Because it has shed 85% of its value over the past year, folks betting against the stock have made a lot of money. But here's the thing:

In just three days, after close of trading on Thursday, Nov. 7, Bloom is due to report its fiscal Q3 earnings results.

Eight young tech workers gathered around some financial reports and a laptop and cheering.

Image source: Getty Images.

Now what

Now, Bloom's numbers might not be great this week. (Indeed, investors are braced for negative earnings.) But analysts think there's a reasonable possibility that Bloom will break even and report neither profits nor losses but $0.00 per share earned. Not losing money is a pretty low bar to clear, even for Bloom, and in the event investors react positively to such news, short-sellers will probably be elsewhere when that happens.

Thus my guess: Today's surge in "buying" at Bloom Energy is actually more a case of a lot of short-sellers trying to out their short positions in unison so as to protect the profits they've already made -- just in case Bloom surprises and reports a profit of some sort on Thursday.

With earnings forecasts as dismal as they look, even a surprise as small as just a penny-a-share profit could cause a lot of pain to short-sellers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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$24.72 (-5.68%) $-1.49

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