This year isn’t off to a great start for Bloom Energy (NYSE:BE), which is falling today on news that Bank of America Securities has downgraded shares. Specifically, BofA analyst Julien Dumoulin-Smith has lowered BE stock to an “underperform” rating. Of course, not all of Wall Street is so bearish on Bloom, but Dumoulin-Smith’s take has been enough to send shares down today.
Does this mean that it’s time to sell BE stock before shares fall even further? Not necessarily. The company may be struggling now, but it operates in a lucrative market that’s still growing. Let’s take a look.
What’s Happening With BE Stock?
Today has been fairly volatile for BE stock. As of this writing, shares are down 5% for the day. While this performance has wiped out much of the gains that Bloom Energy made last week, investors should be careful to examine the news surrounding BE in context before they write off shares.
Dumoulin-Smith’s downgrade centers around low revenue expectations. The analyst reduced his own revenue predictions for Bloom for both 2024 and 2025 by 15% and 25%, respectively. His current price target for BE stock is $10 per share as well, indicating around 15% downside potential as of this writing. Finally, Dumoulin-Smith also highlighted concerns about the company’s decision to not internally hire a new chief operating officer.
The analyst said in a note:
“The change and timing only adds uncertainty with 4Q23 requiring growth for [fiscal year 2024] consensus and building momentum to FY24 […] Management had previously alluded to need to make up ground in the final stretch of 2023 to achieve FY23 targets and set a path for 2024 growth.”
MarketWatch notes that Bloom is scheduled to report earnings for the fourth quarter on or around Feb. 8. This should offer investors further insight into what to expect from the firm’s revenue later this year. The report should also help them determine whether Dumoulin-Smith’s estimate reduction is an astute call or overreaction.
What Comes Next?
Despite the recent analyst downgrade, BE stock is still regarded with fairly high favor on Wall Street. The stock currently boasts a moderate buy consensus rating on TipRanks, with nine out of 15 analysts rating it as a buy. Dumoulin-Smith is one of only two analysts to issue a sell rating for shares.
As noted, Bloom also operates in an industry with high growth potential. Specifically, the global fuel cell market is expected to expand at a compound annual growth rate (CAGR) of 25.3% between 2024 and 2030. InvestorPlace contributor Faisal Humayun rates BE as a top hydrogen stock to buy as well, citing the “big addressable market for the company’s solid-oxide fuel cell technology.”
All of this suggests that Bloom Energy may ultimately turn around and make up lost ground, even as bearish predictions like Dumoulin-Smith’s loom in the background.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
