Renewable energy trends may bode well for Bloom Energy (NYSE:BE) in theory, but as you can see from any BE stock chart, this has failed to translate into gains for investors.
In fact, if you have owned shares in this producer of hydrogen fuel cell systems for power generation over the past year, you are undoubtedly sitting deep underwater on your position.
Even those who have bought Bloom more recently, chances are you have experienced a moderate level of losses.
If that’s not bad enough, it’s questionable whether BE could soon turn a corner. Yes, the company’s revenue keeps growing. Demand for non-fossil fuel energy sources keeps rising across the globe. However, don’t expect either of these strengths to help get shares back on track.
At least, as long as a key issue continues to persist. Until this ceases, shares are likely to keep trending lower.
What’s Holding BE Stock Down?
It’s not only the overarching renewable energy trend that may have you excited about Bloom Energy. In recent months, the company has made several big announcements, that possibly bode well in terms of future growth.
For instance, news of Bloom’s further expansion into Europe.
So then, if the company remains in growth mode, what exactly is holding BE stock down? Chalk it up to underwhelming results, in particular continued profitability challenges. Again, with the global pivot towards carbon-free energy sources, increasing revenue hasn’t been an issue.
Last quarter’s fiscal results for Bloom are good example of this. During the period, the company reported year-over-year revenue growth of 23.8%.
Bloom also reiterated its full-year 2023 revenue outlook (between $1.4 billion and $1.5 billion). Hitting guidance for the full-year would represent YoY top-line growth of between 16.7% and 25.1%.
But while that may sound impressive on the surface, keep in mind that Bloom’s reported top line last quarter fell short of sell-side expectations, as did earnings. Analysts expected the company to narrow its losses YoY from 20 cents to 14 cents per share, but reported non-GAAP net losses came in at 17 cents per share.
Big Improvements May Not Lie Ahead
Sure, one can counter that the above-mentioned disappointing results alone fail to make the bear case for BE stock. After all, these figures only slightly came up short of expectations.
More importantly, with forecasts for the next year calling for Bloom Energy to report an even higher level of revenue growth (30.6%), not to mention a swing to profitability, couldn’t now be an opportune time to buy, ahead of improvements?
I wouldn’t jump to that conclusion. For one, a resurgence in revenue growth is far from guaranteed. Forecasts may be overestimating the impact of increased international sales, as well as growth stemming from the launch of products like the company’s Series 10 fuel cell, as well as its recently-enhanced Bloom Energy Server for net zero heating and cooling.
As InvestorPlace’s Dana Blakenhorn recently argued, electricity produced by green hydrogen has yet to become cost-effective. This could both limit growth in the year ahead, and well as continue to weigh on margins.
Put simply, much suggests that it is hardly a slam dunk that Bloom soon reports big improvements to its operating performance. It is far too speculative to buy the stock, on the expectation this happens.
Stay Away Until the Story Changes
Calling a stock a “show me” story may be cliche, but this Wall Street jargon applies well to the situation with Bloom Energy.
Until the company next reports quarterly numbers/updates its outlook, uncertainty over future growth, as well as an eventual move to consistent profitability, will likely continue to negatively affect BE’s performance.
Instead of blooming, as its corporate name suggests, shares could wither to lower prices.
Worse yet, over the past few months, indirect factors like rising optimism about cooling inflation and a sooner-than-expected lowering of interest rates have possibly provided Bloom shares some support. If this optimism reverses course, and there’s another broad market sell-off, speculative growth stocks like this one could experience outsized losses.
Feel free to take a second look if the story changes, but until then, staying away is your best move with BE stock.
BE stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.