While already interesting as the world moves toward greener energy sources, Bloom Energy (NYSE:BE) has gotten a major boost recently from the demand for on-site power at AI data centers.
By some estimates, data centers could account for 21% of global power demand by 2030, more than 10 times their current share, so is Bloom Energy a buy today as a pick-and-shovel energy provider for the AI world?
Sales Soar to Near $1.5 Billion
Last year’s revenues rose 10.5% to $1.47 billion and gross margin almost doubled to reach 27.5%. Management is also forecasting positive growth in 2025, with a 19% increase in revenue at the midpoint of its guidance range.
Yes, sales growth has been choppy but the general trend over the past few years has been broadly positive.
With revenues last year almost doubled that amount, it’s clear that Bloom Energy has taken full advantage of the economic tailwinds since the start of the decade.
Bloom also crossed a crucial threshold in Q4, delivering its first significantly positive quarter of net income. Though it is still in the red on a trailing 12-month basis, Bloom was able to generate net income of about $105 million in Q4. While a single quarter of profitability may not signal earnings increases ahead, it was a significant development that up to now has operated at a consistent loss.
Bloom ended last year with a $2.5 billion backlog for its fuel cells, demonstrating high ongoing demand and multi-decade service contracts. That stream of reliable cash flow makes it deeply attractive to investors seeking long-term stability, though it’s worth noting that Bloom is still very much in the early stages of building out its business.
How Does BE’s Valuation Look?
At the moment, Bloom Energy shares trade at 2.6x sales, 7.0 times book value and 116.8 times operating cash flow. At these high multiples, the company will clearly need to continue delivering significant growth in order to avoid stagnant or falling share prices. Even with the selloff that has taken place in response to tariff development in recent days, the stock is still up by about 45% in the last 12 months. This opens the door to the possibility that it may have run up too much and could be susceptible to a deeper selloff if the economic outlook worsens.
That fact, however, hasn’t deterred analysts from assigning a fairly high target price to the stock. The current average price forecast for BE is $25.96, about 52.5% above the most recent price of $17.02. While investors likely shouldn’t bank on such high returns in today’s extremely difficult and uncertain market environment, it’s clear that analysts remain basically optimistic about Bloom’s future.
Will New Tariffs Impact Data Center Demand?
With part of Bloom Energy’s appeal resting on its ability to power AI data centers, the looming question is whether the boom in data center construction will persist under a new high-tariff ecosystem.
Unfortunately for Bloom and other supporting companies, the outlook may not be too positive. Higher costs on many electronic components could reduce investment in AI infrastructure, especially as tech companies refocus on their core businesses to ride out the potentially tough times ahead.
Even ignoring these points for a moment, Bloom also has to compete with more traditional energy sources when it comes to the AI data center business.
Many companies, up to and including Microsoft, are exploring natural gas to power their data centers. Bloom’s fuel cells are certainly greener and more innovative, but they may not be able to scale up as quickly to meet immediate power needs.
Bloom’s Lack of a Dividend
Another strike against Bloom Energy is the fact that it doesn’t pay a dividend. Most established energy companies pay fairly large dividends, making them historically good assets to hold under less favorable economic conditions.
As a fairly young startup, Bloom doesn’t have this advantage. While the cash flows it gains from its long-term contracts could certainly enable Bloom Energy to pay a dividend in the future, the fact that it doesn’t right now could create one additional layer of risk to buying the stock.
Is Bloom Energy Stock a Buy, Sell or Hold?
Bloom Energy is a strong buy according to 25 analysts who have a consensus price target of $25.58 per share.
By many measures, Bloom Energy is an appealing business. It offers a novel source of green energy that could help meet an extremely fast-growing industry’s power needs. The company has also performed really well, delivering strong revenue growth over the last five years and breaking through to net profitability at the end of last year. The large backlog of projects Bloom already has, combined with long-term service contracts, also bodes very well for the company’s future.
With that said, there could be significant risks in buying a high-growth stock like BE in today’s market. Tariffs and broader weakness is likely to reduce data center investment, potentially hindering Bloom’s forward growth. Companies are also set to put less emphasis on emissions targets, turning instead to natural gas to power their data centers.
Those who already own shares would likely be ill-served by selling them into a down market, especially at a time when the business itself is performing fairly well. With so much uncertainty around how trade tensions that are still developing will affect Bloom’s business, however, now may not be the time to buy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
