In November 2024, Bloom Energy(NYSE: BE) made a big announcement: It will be supplying a roughly 80-megawatt fuel cell project in South Korea. The project, assuming all goes as planned, will be the "world's largest fuel cell installation in history."
Being involved in this project is clearly good news for Bloom Energy, but what does it mean for investors?
A very large project
Bloom Energy's new project is being developed by SK Eternix. SK Eternix is a Bloom Energy partner and has been a distributor of Bloom Energy's products in South Korea since 2019. The 80-megawatt project will power two "ecoparks" in the North Chungcheong Province in South Korea. It is expected to be up and running fairly quickly, as it is "expected to begin commercial operations in 2025."
Specific financial details were not provided. However, the CEO of SK Eternix noted, "This successful financing agreement reaffirms the market's trust and expectations for our renewable energy capabilities." While that statement is specific to SK Eternix, the fact that the company is using Bloom Energy's technology means the successful financing is also a statement about Bloom Energy. If SK Eternix were using questionable clean energy technology, it probably wouldn't have been able to get financing at all.
So all in, this large project is good news for Bloom Energy, the most notable benefit being the further adoption of its fuel cell technology. That is a show of support for the technology and another chance for Bloom Energy to show off its tech to potential future buyers. It would be better if Bloom Energy provided dollar figures for the deal, since that's the only way to really analyze the financial benefit, but investors clearly haven't gotten too stuck on that negative, given the swift jump in the company's stock price at the end of 2024.
While it's probably reasonable to take the lack of project financials in stride, there are some caveats to consider. The biggest is that Bloom Energy is an upstart, money-losing company.
The very first risk management highlights in the risks section of its 10-K is "The distributed generation industry is an emerging market, and distributed generation may not receive widespread market acceptance, or demand may be lower than we expect, which may make evaluating our business and future prospects difficult." A bit further down in the risk's section, it notes that "We have incurred significant losses in the past, and we may not be profitable in future periods."
The losses are pretty staggering, actually, with the company noting that between its founding in 2001 and the end of 2023, it had accumulated losses of $3.9 billion. The company is pretty open about its business model, too, with CFO Dan Berenbaum explaining in the company's third-quarter earnings release that "Bloom is a project-based business, which can lead to quarterly variability."
That statement brings it all together when considering the large South Korean project's impact on 2025 financial results. It will likely be a big positive, and might even help push Bloom Energy's income statement into the black.
But one project isn't going to be enough to turn Bloom Energy into a sustainably profitable company. This is a fact the company's 10-K also brings up, with the risks section stating, "Our financial condition and results of operations and other key metrics are likely to fluctuate, which could cause our results for a particular period to fall below expectations, resulting in a severe decline in the price of our common stock." The reverse is also true, with strong results for a particular period leading to a large increase in the stock price.
The key fact to keep in mind, however, is that given the project-based business model, Bloom Energy's financial results are likely to swing from good to bad and back again. So, at least for now, this is a risky stock to own, and only the most aggressive investors should probably buy it, even though the South Korean project could give a big boost to earnings in 2025.
One big project is good news, but Bloom Energy is still building its business
The South Korean project is clearly a notable win for Bloom Energy that is very supportive of its technology. The showcase of the tech, assuming it functions as expected, could help spur the future adoption of the technology by others.
So investors should see this as good news, but don't get carried away. Bloom Energy is still trying to build its business, and even if the project helps to push the company's earnings into positive territory, future losses are almost certain.
In other words, the risk of buying shares in this start-up company after the swift end of 2024 rally is still very high. Indeed, that big stock advance following the contract win may not stick around for very long.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
