Is Bloom Energy a Buy Now?

Bloom Energy (NYSE: BE) has, in little over a year, emerged from relative obscurity -- the kind of boring obscurity that made it seem at most a dynamic player in a niche market -- to skyrocket into a premier provider of data-center power.

Early investors who saw the spark -- the (almost) carbon-free spark -- in Bloom have been rewarded for that insight some 12 times over. Put in figures that will make anyone who isn't a longtime Bloom shareholder feel a little more piqued: $1,000 invested last year in Bloom would be worth about $13,310 today.

Who would have guessed that Bloom would become the energy sector's hottest stock? Likely those with eyes on the trend that has been magic beans to Bloom's revenue: the rollout of artificial intelligence (AI), the data centers that service it, and the astronomical amounts of electricity required to make it possible.

The question for investors today is whether Bloom's unprecedented growth can continue and whether that constitutes a wise investment.

Image source: Bloom Energy.

The hardest question about Bloom

To start, we could talk about Bloom's stunning revenue growth, about 130% year over year last quarter. We could also discuss the monumental deals, all related in some way to AI infrastructure, from $5 billion with Brookfield Asset Management to a value of $2.6 billion with Nebius, to its partnership with Oracle on Project Jupiter. We could also talk about its $20 billion backlog, which includes many of the aforementioned projects.

But I'd like to start with something a little closer to home, and by that I mean my own predictions of Bloom stock.

You see, as I've been writing about Bloom over the last year, I've been stunned, almost to the point of disbelief, at the stock's relentless drive upward. It's no secret that Bloom, on paper, looks vastly overvalued, trading at a price-to-book ratio of about 100 and a forward price-to-earnings of 159. To anyone with any sensitivity to valuation, both of those scream, "bubble territory."

And yet Bloom has crushed any of my expectations of an imminent wipeout. It's not that I've ever doubted the company: Its fuel-cell servers are, right now, one of the only clean energy sources for on-site power generation that can be installed within 90 days. Its marquee list of clients has long been star-studded even before AI became a tailwind -- Walmart and Home Depot were among them. But despite all these wins, to call Bloom stock a buy, when it seemed like more buying than selling had been done, appeared, to this Warren Buffett disciple, more imprudent than good judgment should allow.

So, in recognition of my own underestimation, perhaps the better framing is not a recommendation but a question: Is Bloom's breathtaking valuation right now absurd, or is the opportunity larger than what has been expected?

By Bloom's own predictions, the data center party could just be getting started. The electricity needed to run these server farms could double over the next three years to about 150 gigawatts (GW), according to the company's 2026 Power Report. What's even more striking is that the forecast is already double what experts forecast just two years ago.

So, yes, the opportunity in front of Bloom is enormous and expanding. There's no reason to think this stock can't grow into its current valuation, although any hint that it won't could deprive it of that light of optimism that would make today's price seem low in retrospect.

Steven Porrello has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bloom Energy, Brookfield Asset Management, Home Depot, Oracle, and Walmart. The Motley Fool has a disclosure policy.