What happened
Shares of leading hydrogen power technologist Bloom Energy (BE -1.93%) rose by 6.8% Monday. There was no news from the company that could be said to have driven those gains, but high-growth stocks broadly were heading higher as some investors begin to reassess their merits after a brutal start to 2022.
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So what
The Federal Reserve has begun to raise interest rates and has expressed clear plans to continue doing so, and the yield of the 10-year U.S. Treasury has surged in response. That rate as of Monday was 2.4%, compared to just 1.6% at the start of the year. As a reminder, higher interest rates reduce the present value of stocks, especially the stocks of high-growth companies that are as yet not profitable or are delivering only minimal earnings.
However, after the tech-heavy Nasdaq Composite briefly entered bear market territory in March, growth stocks have been on the rise once more. Now that the market has revalued many of these companies based on the expectation of higher interest rates, investors are refocusing on their business growth and valuation metrics.
That seems to be what is happening with Bloom Energy right now. Though the stock is more than 40% below the all-time high it reached over a year ago, it has more than doubled from the 52-week low it touched back in January.
Data by YCharts.
Now what
As fossil fuel prices soar, renewable energy sources are becoming more and more attractive as alternatives. Bloom Energy is coming off a solid performance in 2021, with record acceptances of its Bloom Energy Servers for on-site power generation and storage. In 2022, the company expects to achieve more than $1 billion in annual sales for the first time, and in conjunction with that milestone, expects to have positive cash flow from operations.
Longer term, organizations around the globe are looking for new ways to become more efficient, and cutting carbon dioxide emissions is also a strategic priority. The Bloom Electrolyzer and its Hydrogen Energy Server, which will begin shipping later in 2022, can be paired with wind or solar power sources to create green hydrogen, and their sales stand to benefit in a big way from these trends. Management thinks it can grow revenue at an average annualized pace of 30% to 35% over the next decade.
The question for investors now is whether Bloom Energy stock is attractively priced or not. The company is still burning cash, but it had $396 million in unrestricted cash and equivalents on the books at the end of 2021, and trades for just 3 times forward sales. Be sure to keep this hydrogen energy stock on your watch list.
