The world's thirst for energy is insatiable, and a drive for new energy sources has companies like Bloom Energy (NYSE: BE) developing hydrogen systems to provide customers with grid-independent energy. Hydrogen is an excellent energy source because it burns cleaner and could help companies meet long-term carbon-reduction goals.
With such promise, some forecast the hydrogen energy industry could grow into a $11 trillion market, and Bloom Energy is helping to lead the charge. Here's what investors need to know about the hydrogen energy company today.
Hydrogen energy's promising future
Clean hydrogen energy has massive long-term potential. According to McKinsey, clean hydrogen could go from 1% of the total hydrogen market today to 30% in 2030 and 75% by 2040. By 2050, the consultant says hydrogen demand could grow sixfold.
One issue with using hydrogen for fuels is that it has been inefficient and expensive. Clean hydrogen must be made through electrolysis whereby an electrolyzer uses electricity to split water into hydrogen and oxygen. Electrolyzers can range in size and be an excellent way to generate carbon-free energy as long as the electricity used in the process is from renewable sources.
Bloom Energy Server and Bloom Electrolyzer help bring customers affordable and reliable hydrogen energy. Their electrolyzers aim to overcome the inefficiencies associated with electrolysis and create hydrogen with less energy, which could make hydrogen energy more practical as an energy source down the road. Using solid oxide technology, Bloom Energy Server can convert fuel (natural gas, biogas, or hydrogen) without combustion.
Image source: Bloom Energy.
Bloom's platform appeals to customers looking to meet lower carbon goals and solves problems about cost and reliability. Its servers can be installed quickly and provide a microgrid solution to customers who can't afford power outages. The servers are also resilient against weather events, cyberattacks, or other grid outages.
Bloom's financial standing
The technology behind Bloom Energy is promising, but it's essential to consider its current financial situation before diving into the stock. Most of Bloom's revenue comes from the sales of its energy server, which requires a significant amount of capital upfront. These high upfront costs could deter some. To help customers out, Bloom provides financing or pay-as-you-go models for customers to help finance their acquisitions.
Last year, Bloom raked in $1.3 billion in revenue, most of which ($975 million) came from product sales, with the bulk of the remainder from installation and service fees. Top-line growth has been solid, and over three years, the company's revenue has increased at a nearly 19% compound annual rate.
However, profitability is still a question. Last year, Bloom lost $302 million and has lost $767 million over the past three years. The company has yet to turn a profit and has its work cut out to achieve the elusive milestone.
To fund its operations, Bloom has turned to the equity market to raise capital, and from 2018 to 2023, the company's shares outstanding increased from 109 million to 225 million. In other words, shareholders who bought in 2018 would have seen their position cut in half through shareholder dilution.
BE Revenue (TTM) data by YCharts.
Is Bloom Energy stock for you?
Bloom Energy could play an important role in the rise of artificial intelligence (AI) data centers. The company has signed agreements with numerous data-center operators that want its grid-independent solutions. In May, the company entered into a power-purchase agreement with Intel.
As investors, it's essential to understand where the company is in its lifecycle and in relation to your investment style. Bloom Energy could play a key role in the growth of data centers' power demand, and its resilient power solutions have excellent potential for long-term growth. However, the company still has to prove it can consistently produce a profit for shareholders.
Investors looking to capitalize on the clean hydrogen trend with a long-term outlook may find Bloom Energy's growth potential compelling. However, as losses pile up on the income statement, be aware of the possible dilution risk and size your investment appropriately.
Should you invest $1,000 in Bloom Energy right now?
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Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
