On Wednesday, Truist Securities shifted its stance on Bloom Energy Corp . (NYSE:BE), raising the stock from a Sell to a Hold rating and increasing the stock price target to $11 from $9. The firm's revised outlook comes after a significant drop in the company's shares year-to-date, which have fallen by approximately 24%, in contrast to the S&P 500's gain of 1% over the same period.
The analyst from Truist Securities believes that the current stock valuation of around 11 times the firm's projected 2025 EBITDA now more accurately represents both the potential and the hurdles associated with Bloom Energy's fuel cell operations and nascent hydrogen initiatives.
Despite not having a direct effect on their forecasts, the analyst noted that today's announcement of a hydrogen collaboration with Shell (LON:SHEL) could lend additional support to Bloom Energy's long-term hydrogen ambitions.
While the analyst reiterated their previous estimates, they cited the disappointing fourth-quarter earnings and fiscal year 2024 guidance as reasons for the initial downgrade. Management's claims of strong demand from data centers, electric vehicle charging stations, and an extensive backlog have not yet translated into significant sales. Furthermore, the recent Series 10 offering by the company did not have the anticipated impact.
Nevertheless, Truist Securities remains cautiously optimistic about Bloom Energy's ability to maintain product gross margins and reduce costs despite uneven quarterly sales. However, the analyst anticipates that Bloom will likely lower its 2026 revenue targets of $4 to $5 billion, and that consensus revenue estimates for fiscal year 2025 will need to be adjusted slightly downwards from $1.88 billion to more closely align with their estimate of $1.80 billion.
In conclusion, while adjusting their estimates to reflect a more conservative outlook, Truist Securities maintains its fiscal year 2024 and 2025 revenue estimates at $1.45 billion and $1.80 billion, respectively, which are in line with or slightly above the street's projections.
The price target increase to $11 from $9 is based on an 11 times forward EBITDA multiple, applied to the firm's 2025 EBITDA estimate of $249 million.
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