JP Morgan warns investors to sell this ‘clean energy’ stock, already down 40%


What was once one of the most interesting clean energy stocks in the market has now lost almost half of its market value in a single day. Bloom Energy (NYSE: BE), a company which makes fuel cells used for commercial backup power, used to be an extremely exciting unicorn valued at over $1 billion when it was private.

After going public in July 2018, the stock rose from $15 to as high as $38 per share, giving Bloom a market cap of $6 billion. As of today, however, the stock dropped by 40 percent after the company warned that investors shouldn’t expect profits for 2020.

The company reported their Q2 2019 operating results, where they reported a significant surge in revenue, but also warned shareholders that the future would see neutral growth at best. Specifically, new climate change laws in California and New York that exclude natural-gas fuel cells from state subsidies. Many analysts have already cut-price targets and expectations for the once highly anticipated company.

In all honesty, the idea that Bloom Energy exists as a business only because of generous subsidies isn’t surprising. Investors were well aware of the company’s dependence on state subsidies as far back as the IPO.

Even worse, the company’s fuel cell technology was already becoming outdated in comparison to lithium-ion batteries for energy storage applications. In a free market, Bloom Energy will have trouble competing against this more modern technology.

On the earnings call, Chairman and CEO K.R. Sridhar tried his best to comfort investors, doing his best to suggest to shareholders that demand for natural-gas-powered fuel cells will remain strong.

He went on to say that most energy power grids aren’t capable of providing 24/7 reliable electricity, and most of these systems can’t withstand the consequences of a bout of extreme weather, a reason which he feels will guarantee that there still will be demand for Bloom’s fuel cells.

However, most investors and analysts weren’t persuaded by Sridhar’s efforts. JP Morgan analyst Paul Coster wrote in a research note on Tuesday where he warned this was a terrible blow for the company. “The Green New Deal debate has caused commercial end-customers to hit the pause button on gas investments,” going on to say that the development “also has implications for the gas utilities and pipeline companies.” While the analyst still retains his “overweight” rating for the stock, he significantly cut his target price down from $33 to $18, warning investors that further declines are on the horizon. “The stock will likely be in the penalty box until visibility improves.”

Shares of Bloom Energy fell by 40.3 percent on Tuesday, ending the day at $4.6 per share.

Bloom Energy Company Profile

Bloom Energy Corp is engaged in providing electric power solutions. The solution of the company includes bloom energy server which is a stationary power generation platform to provide uninterrupted power. It earns revenue from sale and installation of its energy servers to direct and lease customers, provides services under its operations and maintenance contracts, and by selling electricity to customers under PPA agreements. – Warrior Trading News