Hydrogen is Earth's most abundant chemical element and could be vital in decarbonizing the global economy. Some see hydrogen as the "new oil" and say it could be a key component in helping companies meet carbon reduction goals.
Bloom Energy (BE +19.75%) is one company leading the charge. The hydrogen energy company has been working on manufacturing fuel cell and electrolyzer systems that could allow for grid-independent, low-carbon power generation. However, it still has work to do to improve its bottom line. Here's what you need to know if you're considering buying stock in Bloom Energy today.
NYSE: BE
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Bloom Energy's technology could revolutionize clean energy production
Bloom Energy manufactures fuel cell-based power platforms that could be key in helping reduce carbon emissions. Clean hydrogen is made through an electrolyzer, which uses zero-carbon electricity to split water into hydrogen and oxygen. However, making clean hydrogen has been too expensive. Bloom Energy aims to fix this problem. It has been developing solid oxide technology to create hydrogen with less energy for over twenty years.
The Bloom Energy Server uses its proprietary solid oxide technology to convert fuel (natural gas, biogas, hydrogen) through an electrochemical process without combustion. These servers can be clustered together to provide customers with hundreds of kilowatts to hundreds of megawatts of energy based on their needs.
Image source: Bloom Energy.
The company says that its platform helps customers meet lower carbon goals while solving the challenges of low-carbon solutions, including problems with reliability and cost. One big selling point is that it's designed to provide reliable energy that is resilient against weather events, cybersecurity attacks, or other grid outages. It can also be installed more quickly than new transmission lines.
A look at Bloom Energy's finances
Most of Bloom Energy's revenue comes from sales of its energy servers. Because its servers require significant upfront investments, it provides financing options or a pay-as-you-go model for customers to finance their acquisition. Many of its customers are large institutions with an investment-grade rating, although it has recently expanded to below-investment-grade and international customers.
Over the last five years, Bloom Energy's revenue has grown by 25% compounded annually. Last year, the hydrogen company raked in $1.3 billion in revenue. Despite this excellent top-line growth, it has failed to generate a profit since going public in 2018. Last year, the company had a net loss of $302 million. Over five years, it has lost $1.2 billion.
Another drawback to investing in Bloom Energy has been shareholder dilution. This happens when a company issues additional stock, reducing the ownership proportion for current shareholders. From 2018 to 2023, the company's shares outstanding went from 109 million to 225 million.
BE Revenue (TTM) data by YCharts
Long-term tailwinds could give the hydrogen company a boost
The future for clean hydrogen energy could be massive. According to a report by McKinsey, hydrogen demand could grow sixfold by 2050. In addition, the consulting group says that clean hydrogen could go from 1% of the total hydrogen market today to 30% in 2030 and 75% by 2040.
Bloom Energy also recently announced a collaboration with Shell. It is working with the energy company to study opportunities in "replicable, large-scale, solid oxide electrolyzer (SOEC) systems that would produce hydrogen for potential use at Shell assets."
This opportunity could be huge for Bloom Energy. Its SOEC technology could help produce clean hydrogen that could eventually reduce "gray" hydrogen currently produced at refineries with high carbon emissions. If successful, it could see widespread adoption of its solutions.
Is Bloom Energy stock right for you?
Investors must balance Bloom Energy's explosive upside potential for the clean hydrogen economy with its current financial situation. The company is leading the way in clean hydrogen technology. However, it could take years to become a viable, cash-generating entity. If your investing approach is more conservative, you'll want to wait for the company to generate profits consistently.
However, investors looking to get ahead of the clean hydrogen trend may find Bloom Energy's stock compelling. Bloom Energy's partnership with Shell shows that its technology is gaining acceptance in larger end markets. If you buy today, be aware of the possible dilution risk as losses pile up and size your investment appropriately.
