Why Bloom Energy Stock Just Jumped
Key Points
Susquehanna lowered its price target on Bloom -- and the stock jumped anyway.
Analysts expect large increases in revenue and earnings from Bloom in Q1.
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Bloom Energy (NYSE: BE) stock jumped 7.5% through 1:25 p.m. ET Thursday after investment bank Susquehanna lowered its price target -- but only to $173 per share.
With Bloom stock trading below $158 today, the analyst still sees $15 worth of upside in the hydrogen stock -- and Susquehanna is keeping a "positive" rating on Bloom.
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What Susquehanna says about Bloom Energy stock
Bloom Energy is due to report Q1 2006 earnings on April 30. In anticipation of this, Susquehanna updated its estimates and tweaked its price target to match.
We don't know precisely what numbers Susquehanna has come up with, but judging from consensus estimates reported on Yahoo! Finance, most analysts are expecting big things from Bloom this quarter. Revenue of $535.2 million is expected to be up 64% year over year; earnings forecast at $0.13 per share should be more than four times what Bloom earned in the year-ago quarter.
And by the time 2026 is done, most analysts expect Bloom to end up with $1.39 per share in total profit -- up 83% year over year.
How to value Bloom stock
But is that enough? At $158 per share, even $1.39 per share would still give Bloom stock a price-to-earnings ratio well north of 100, a valuation so extreme that even 83% annual growth might not justify it. Worse, the "$1.39" that analysts forecast for Bloom this year aren't even GAAP earnings, but only non-GAAP.
GAAP profit for the year should be closer to $0.96 per share, resulting in a P/E ratio of 165.
Free cash flow for the year is expected to be negative.
Even if Bloom manages to beat earnings somewhat this month, I see more risk than reward in the stock.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bloom Energy. The Motley Fool has a disclosure policy.
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