Shares of Bloom Energy (BE) are under pressure this morning after Credit Suisse analyst Michael Weinstein downgraded the stock to Underperform on valuation, stating that the shares trade at a premium only a week after his initiation with little incremental fundamental news to justify the strength. Weinstein had started coverage of the stock last week with a Neutral rating, highlighting the nearly 80% jump off the $15 IPO back on July 25.
CREDIT SUISSE SAYS SELL BLOOM ENERGY: In a research note to investors this morning, Credit Suisse’s Weinstein downgraded Bloom Energy to Underperform from Neutral, citing valuation as the stock trades at a 33% premium to his target price of $24 set only a week ago with little incremental fundamental news to justify the strength. While the analyst acknowledged the disruptive potential of Bloom Energy’s technology, he noted that the stock is now trading at a premium even to his “Blue Sky scenario” of $30, where he assumes continued 7% annual cost reductions from 2023-2030 help to push deployment growth 15% per year during this period. Although the company has shown an impressive success so far, much work remains to be done to continue lowering costs and deliver next-generation improvements, Weinstein contended. Bank of America Merrill Lynch analyst Julien Dumoulin-Smith had also initiated Bloom Energy with an Underperform rating and $19 price target, citing high expectations and execution risks over costs and deployment.
MORGAN CALLS COMPANY ‘A TRUE DISRUPTOR’: Bullish on the stock, Morgan Stanley analyst Stephen Byrd started coverage of Bloom Energy last week with an Overweight rating and $30 price target. The analyst called the company “a true disruptor” that is revolutionizing on-site power with its natural gas fuel cell systems and pointed out that he sees a path to “significant” margin expansion and cash flow generation that is not yet reflected in the stock. Furthermore, Byrd told investors that he believes Bloom has a multi-year lead given its technological advances, cost reductions, high barriers to entry and very limited set of commercial competitors. The analyst sees a “very large” market opportunity that continues to grow for Bloom as costs decline. Voicing a similar opinion, his peer at KeyBanc also started Bloom Energy with an Overweight rating and $27 price target. Analyst Tahira Afzal said she views it as being in nascent phases of adoption as a practical, low-emissions power solution for C&I customers who are becoming increasingly emissions conscious and are looking for more weather-resilient energy solutions. Afzal assesses Bloom Energy to be well-placed to deliver close to 40% CAGR volume sales and notable margin expansion into 2020/21. Additionally, she pointed out that she views recent positive free cash flow inflection as sustainable and likely to improve, on an annualized basis.
