Street Fight: Analysts split on Bloom Energy after IPO
Several Wall Street analysts started coverage of Bloom Energy (BE) this morning. While Morgan Stanley analyst Stephen Byrd called the company "a true disruptor" and initiated the stock with a buy-equivalent rating, his peer at Bank of America Merrill Lynch started Bloom with an Underweight rating on high expectations and execution risks over costs and deployment. Highlighting the nearly 80% jump off the $15 IPO back in July 25, Credit Suisse analyst Michael Weinstein initiated coverage of Bloom Energy with a Neutral rating. BUY BLOOM ENERGY: Morgan Stanley's Byrd was among several Wall Street analysts that initiated coverage of Bloom Energy this morning. The analyst started the shares with an Overweight rating and $30 price target, calling the company "a true disruptor" that is revolutionizing on-site power with its natural gas fuel cell systems. The analyst pointed out that he sees a path to "significant" margin expansion and cash flow generation that is not yet reflected in the stock. Furthermore, Byrd believes Bloom has a multi-year lead given its technological advances, cost reductions, high barriers to entry and very limited set of commercial competitors. The analyst sees a "very large" market opportunity that continues to grow for Bloom as costs decline. Meanwhile, his peer at KeyBanc also started Bloom Energy with an Overweight rating and $27 price target. Analyst Tahira Afzal told investors that she views it as being in nascent phases of adoption as a practical, low-emissions power solution for C&I customers who are becoming increasingly emissions conscious and are looking for more weather-resilient energy solutions. Afzal assesses Bloom Energy to be well-placed to deliver close to 40% CAGR volume sales and notable margin expansion into 2020/21. Additionally, she pointed out that she views recent positive free cash flow inflection as sustainable and likely to improve, on an annualized basis. Voicing a similar opinion, JPMorgan analyst Paul Coster also initiated Bloom Energy with an Overweight rating and $32 price target. The analyst argued that Bloom is poised to disrupt the global power market and investors have an opportunity to build positions in a company that is inflecting into profitability over the next two years and is then positioned to grow sales at 25% CAGR with operating leverage for a decade, funded by positive cash flow. BOFA/MERRILL SAYS SELL: Bearish on the stock, Bank of America Merrill Lynch's Dumouln-Smith initiated Bloom Energy with an Underperform and $19 price target, citing high expectations and execution risks over costs and deployment. Smith told investors in a research note of his own that he expects difficulty in reducing costs by 15% and noted he believes pricing may have to be reduced further in order to meet 30%-plus deployment growth, which would significantly impact margins. ON THE SIDELINES: Meanwhile, Credit Suisse's Weinstein started coverage of Bloom Energy with a Neutral rating and $24 price target. After a nearly 80% jump off the $15 IPO, the analyst believes that current pricing captures a fair balance between the risk of executing continued cost reductions and the possible upside from accelerating sales growth once the investment tax credit sunsets in 2023. Oppenheimer analyst Colin Rusch also initiated Bloom Energy with a Perform rating. The analyst acknowledged that he sees the potential for the company to be a core solution provider in disrupting the power market and leading to the possibility for multi-decade growth, but sees limited valuation support at current price levels and also sees significant execution in front of Bloom. Additionally, Baird analyst Ben Kallo and Cowen analyst Jeffrey Osborne started coverage of the stock with Neutral-equivalent ratings. PRICE ACTION: In late morning trading, shares of Bloom Energy have gained over 1% to $22.50.