What happened
Bloom Energy (BE 1.14%) shares dropped significantly on two bits of news this week. As of late Friday morning, the stock was about 25% below last week's closing price, according to data provided by S&P Global Market Intelligence.
NYSE: BE
Key Data Points
So what
The first news item from the fuel cell company this week was its first-quarter financial report. The good news was that the company generated record first-quarter revenue that jumped 37% compared to the prior-year period. Gross profit margin also improved both year over year and sequentially compared to the 2022 fourth quarter.
But Bloom also reported a loss as operating expenses soared. Operating expenses typically include overhead costs such as selling, general, and administrative (SG&A) as well as sales and marketing plus research and development (R&D).
Two days later, investors were hit with another negative surprise: Bloom Energy said it was seeking to raise $550 million by issuing green convertible senior notes. The company said it was planning to use some of the money to pay for many of the aforementioned operating expenses.
Now what
A positive takeaway from the earnings report was that management maintained its outlook for the full year. It does see adjusted operating margin being positive for all of 2023.
As of March 31, the company had total debt of slightly over $400 million. Some of the fresh capital being raised will pay off some of the higher-interest debt. The green convertible senior notes being issued will replace that with a lower 3% interest rate. Investors should take that as a positive development.
But the underlying business still has to prove itself. If the company can bring operating expenses under control and meet its 2023 guidance, this week's plunge could look like a good buying opportunity in hindsight. The stock should still be considered high risk, however, until Bloom can become consistently profitable.
