Climbing more than 11% since the start of the year, shares of Bloom Energy (NYSE:BE) have notably outperformed the S&P 500, which has fallen more than 6% year to date. And there's plenty of more growth ahead according to Paul Coster, an analyst at JPMorgan. Coster recently raised his price target on Bloom Energy's stock to $17 from $14, while maintaining an overweight rating.
Coster's revised price target is noteworthy considering Bloom Energy's shares are currently changing hands at around $8.40. According to Thefly.com, Coster is "encouraged that the decarbonization, decentralization, and digitization of energy continues despite COVID-19."
Although the industry trends that Coster recognizes arguably will benefit the company, the analyst seems a little too charged up about Bloom Energy's prospects. While the company will likely continue to benefit from the move toward decarbonization and grow its top line, there's no indication that it will be able to translate this shift into profits.
Moreover, the company ended Q1 2020 with $860 million in net debt according to S&P Global Intelligence -- a more debt-laden balance sheet than it had at the end of Q4 2019, when it had net debt of more than $770 million. In the present economic environment, it seems unlikely that the market would so enthusiastically opt for a speculative growth company, which is consistently unprofitable and heavily reliant on debt to finance its operations -- let alone ignore the questions about Bloom Energy management's credibility.
For some additional context, investors who are charged up about the revised price target will want to consider that when Coster initiated coverage on the stock in August 2018, he had set a price target of $32, so his current enthusiasm for Bloom Energy is far from unprecedented.