Shares of Bloom Energy (BE 3.68%) rallied 28.2% in March, according to data from S&P Global Market Intelligence.
The fuel cell and electrolyzer manufacturer sold off hard after its fourth-quarter earnings report in February, so the stock was perhaps primed for a rebound on any good news. The announcement of a major collaboration on hydrogen technology with a prominent oil and gas giant, along with analyst upgrades, was just the thing.
Teaming up with Shell on the clean energy of the future
On March 6, Bloom announced a large, wide-ranging collaboration with oil and gas giant Shell plc (SHEL -0.20%). According to the press release, the two companies will collaborate on studying how to build and deploy "replicable, large-scale, solid oxide electrolyzer (SOEC) systems that would produce hydrogen for potential use at Shell assets."
Bloom claims to boast unique solid-oxide technology that can produce hydrogen more power-efficiently than the competition, lowering the need for electricity in the hydrogen-producing electrolysis process. Hydrogen is seen by many as a key fuel in enabling a low-carbon economy. It doesn't produce carbon emissions but is transportable and combustible like natural gas or other fossil fuels.
Certainly, this high-profile partnership lends credence to Bloom's technological differentiation on the hydrogen electrolyzer front. In the wake of the announcement, Bloom received upgrades from two analysts, one at Truist Financial and the other at RBC.
Is Bloom a stealth play on artificial intelligence?
Bloom sold off in February on a revenue and earnings miss and on guidance that the first quarter could be as much as 0% to 20% down from the first quarter a year ago. However, management attributed some of the revenue shortfall to project delays due to the larger-scale nature of its current projects.
Notably, management sees the artificial intelligence (AI) data center build-out as a massive opportunity for its fuel cells, which can convert natural gas, biogas, or hydrogen into low-carbon electricity without relying on the energy grid.
But new AI data centers take time to permit and build, leading to a lengthening of the sales cycle. Yet, even though the first quarter may see some weakness due to the timing of projects, Bloom still sees revenue increasing through the year and finishing up between $1.4 billion and $1.6 billion, compared with $1.33 billion in 2023.
Bloom's technology allows for grid-independent, low-carbon power generation. Given the huge demand for electricity for future AI data centers and general electrification applications, it's a name to follow as a stealth play on these massive megatrends.
