Tuesday Dec 06, 2022

Bloom Energy: Buy Rating For The Future Hydrogen Platform Leader – Seeking Alpha

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Investment thesis

After researching and doing a deeper dive into Bloom Energy (BE), I am initiating Bloom Energy with a buy rating and a target price of $30.90, implying an upside potential of 85%. The reasons for these include:

  1. Quality high growth profile in multiple segments from power generation, to carbon capture and hydrogen.
  2. Strong value proposition to enterprise customers, including lower and more predictable costs, more resilient and reliable power and better ESG profile.
  3. Bloom Energy’s customer profile is increasingly becoming more diversified and more international, while acquiring larger sites and expanding volumes from existing customers.
  4. Rare profitability profile for a hydrogen related company due to improving cost dynamics and cost control initiatives.

Overview

Bloom Energy is a company focused on stationary base load power generation. Its energy platform is referred to as Bloom Energy Servers. The company was the first to create a commercially viable solid oxide fuel cell power generation platform at a large scale.

The Bloom Energy Servers are fuel flexible, meaning that they can create electricity from multiple sources: natural gas, biogas and hydrogen. In addition, its solid oxide fuel cell technology can be used to create hydrogen. As such, Bloom Energy has been in recent times seen as a play to gain exposure into the hydrogen theme, especially in the stationary power generation segment.

As a stationary power platform, it has customers that are amongst the largest utility companies and multi-national corporations in the US and in Korea (elaborated further below), that in my view, shows the strong value proposition of Bloom Energy’s power generation platform.

Industry

To illustrate how Bloom Energy views its target markets and total addressable market, the following shows a nice visual on the huge TAM that Bloom is able to tap on, which includes the US C&I market, the international market, other enabling technologies like Carbon Capture and biogas, and finally the hydrogen opportunity.

Total Addressable Market of Bloom Energy

BE Analyst Day

Based on Bloom Energy’s projections on its key TAM opportunities earlier in December of 2020, it expected to see a sales CAGR of 25% to 30% from 2020 to 2025, driven by its 3 key drivers of stationary power generation in US/Global, enabling technologies, and hydrogen fuel cells and electrolysers.

Bloom Energy’s strong revenue growth over next 5 years

BE Analyst Day

In my opinion, I think that this is achievable, given how its key markets seem to be growing over the next 5 to 10 years. The global distributed energy generation market is expected to grow by 14% over the next decade, while the global carbon capture market is expected to grow about 20% CAGR over the next 10 years. Similarly, the global hydrogen fuel cell market is expected to growth around 39% CAGR over the next 5 years, while the global electrolyser market are expected to grow 30% CAGR over the next 10 years.

To better understand Bloom Energy’s value proposition, we need to understand how its solid oxide fuel cell platform works.

First, the building blocks of the Bloom Energy Servers are individual solid oxide fuel cells. Being a fuel flexible platform, it is able to utilise natural gas, biogas or hydrogen which is passed over the anode …….

Source: https://seekingalpha.com/article/4480949-bloom-energy-buy-rating-future-hydrogen-platform-leader

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