Can the Bloom Energy share price see a post-earnings bounce?

Ahead of its Q2 trading update announcement on 9 August, the Bloom Energy share price has received a boost from the passing of the US climate bill. After positive revenue growth in Q1, investors will be hoping for further optimism.

The Bloom Energy [BE] share price has made a strong recovery in the past month as it prepares to release second-quarter results on 9 August. As of 5 August, shares in the company are up 42.8% since 5 July as investors regain confidence in the hydrogen and sustainable energy generation sector.  

It has been a volatile year for the Bloom Energy share price, however. The shares were trading at around $22 at the turn of the year before tumbling to a 52-week low of $11.47 in May as growth stocks fell out of favour with investors. Since then, the shares have made an astonishing recovery to close at $24.10 on 5 August — a 9.9% premium on the share price at the beginning of the year.

Investor sentiment for clean energy stocks has seen increased optimism in recent weeks as hopes for further investment and tax cuts gather pace after the US Senate passed the climate bill. With Bloom Energy preparing for a shift towards hydrogen technology by developing both hydrogen fuel cells and hydron-extracting electrolysers, shareholders will hope that the company releases a strong set of Q2 results to accompany this optimism.

Revenues rise in Q1 alongside costs

Bloom Energy, which produces efficient solid oxide fuel cells that allow customers to generate low-carbon electricity on site, announced a record Q1 revenue of $201m for the first three months of 2022, representing a 3.6% rise on $194m in Q1 2021. However, the cost of revenue rose at a greater pace from $139m in Q1 2021 to $173m a year later — a 24% increase. The company has seen a rise in costs as inflation has soared this year. As a result, Bloom Energy’s gross margin fell from 28.2% in Q1 2021 to 13.9% in the latest quarter.

Demand for the company’s products has not dried up in the last year as industries seek reliable and greener energy solutions. Bloom Energy’s fuel cells, known as Energy Servers, produce electricity from natural gas or biofuel without the need for combustion. This cleaner energy solution is used by hundreds of companies such as Google [GOOGL], IBM [IBM], and Walmart [WMT].

As of June 2022, Bloom Energy, which was founded by KR Sridhar (pictured), had an $8.5bn order backlog. The company’s backlog reached a record 6,549 systems at the end of 2021, up from 1,994 a year earlier, and it is slowly expanding production to meet this demand. As a result, Bloom is ensuring that it doesn’t sink capital into expensive manufacturing plants without the demand to back it.

The company estimates it has an 80% US market share in the stationary fuel cells sector, and it is also targeting expansion into Europe. Bloom Energy increased its research and development investment in Q1 by $5m to $27m to ensure that the company is at the forefront of the global energy transition.

Analysts optimistic as the US passes new green bill

The hydrogen and green energy sector received a boost last week as the US Senate moved to advance President Biden’s Inflation Reduction Act, which includes $369bn in clean energy incentives. There are hopes that larger green energy investments will stimulate further growth for companies such as Bloom Energy.

Bloom Energy is expected to particularly benefit from the Clean Hydrogen Production Tax Credit included in the bill. The scheme will provide up to $3 per kilogram of hydrogen produced and it is expected to deliver $13bn in value across the industry over the next 10 years, according to the Fuel Cell and Hydrogen Energy Association.

The Bloom Energy share price rose 19.1% over the week ending 5 August as the scheme is expected to assist the company’s lofty hydrogen energy ambitions. Hydrogen energy company Plug Power [PLUG] saw its share price also surged 20% last week on the back of the news.

While the new bill will not impact the upcoming second-quarter results, it does signal a bright future for the company. According to a consensus of 15 analysts polled by the Financial Times, Bloom Energy is still expected to post revenues of $229.4m in the upcoming results — a 14.1% increase on Q1 revenue.

Analysts currently share an optimistic outlook on Bloom Energy shares. Out of 20 analysts polled by the Financial Times, four rated the shares a ‘buy’, seven believed they would ‘outperform’, while the remaining nine analysts gave a ‘hold’ rating.