Shares of Bloom Energy (NYSE:BE) tumbled over 5% on Monday after BofA Securities analysts downgraded the stock to Underperform, citing a potential downside driven by a volume-related reset.
BofA expects Bloom’s revenues for the period from 2023 to 2025 to remain relatively flat rather than experiencing the previously anticipated acceleration. In the past, Bloom Energy has faced challenges in terms of order visibility and growth, which led to the broker downgrading the stock to Neutral in December.
Moreover, BofA argued it has “not seen evidence of the anticipated commercial successes
during the pivotal period of the years.”
While partner SK has increased and extended its order, there hasn't been substantial evidence to support a significant acceleration, it added.
As a result, the analysts also lowered their target price on BE from $16 to $10, assuming flat order assumptions in 2024 and 2025, along with declining average selling prices (ASPs).
“We see BE trading at 50x+ 2024-2025 EV/EBITDA and ~20x 2026 on our new reduced
estimates. This is meaningfully higher than many clean energy peers in the 5-15x range,” the note writes.
The projected decline in profitability and cash flow contradicts the prevailing belief that BE might have lower exposure to the risk of margin compression in 2024 and beyond when compared to other companies in the cleantech equipment sector.
To counterbalance this decline, it will be crucial to rely on profit contributions from data center operations and international projects, analysts said.