Both of these alternative energy companies cover a broad range of industries so which is the better investment: FuelCell or Bloom Energy?
Oct. 23, 2021
FuelCell (NASDAQ: FCEL) was founded in 1969 and among other things is known for operating the largest fuel cell park in the world (in South Korea) and the largest one in North America as well (in Connecticut). Bloom Energy (NYSE: BE) was founded in 2001 and produces solid oxide fuel cells which use proprietary tech to produce electricity. It then either sells the units themselves or electricity created by those units at a 15% discount compared to electricity from the traditional grid. As the world continues to embrace green and renewable energy, which is the better investment: FuelCell or Bloom Energy?
FuelCell: bull vs bear arguments
As per the company's Q3 2021 earnings report, revenue and gross profit are both up over 43% and 135%, respectively, year-over-year (YoY). FuelCell's stock price had an incredible surge back in November when Biden won the presidency but has since receded to more reasonable levels. As the U.S. offers incentives for corporations to lower their carbon footprint and overhaul electric infrastructure for federal organizations, FuelCell stands to profit as its client roster already includes commercial and industrial enterprises like utility companies and municipalities.
However, the company is still overvalued, trading at over 35 times forward sales. This overvaluation is driving bearish sentiments among investors as analysts cite it as the biggest reason for downgrading the stock.
Bloom Energy: bull vs bear arguments
According to Bloom Energy's Q2 2021 earnings report, revenue is up nearly 22%, gross profit surged over 42%, and gross margin increased by 2.3 percentage points, YoY. An important metric to note is service revenue, which is up over 36% in the same time period, showing the company is growing its installation base. Further, its outlook for the year is $1 billion in revenue and roughly 25% in gross margin. The company is on track to becoming cash positive from operations by year's end and to profitability by the end of next year.
Bloom Energy counts companies like Yahoo!, FedEx, and IKEA among its many clients spanning a wide variety of industries. This helps ensure the company is protected in the event of sector fluctuations. The company makes money by selling its own Bloom Energy Server or Bloom Box units or by selling electricity generated by its own servers. Constantly expanding its footprint, Bloom Energy expects to cover all 50 U.S. states by the end of 2025. The company also operates efficiently, striving to reduce its revenue cost by as much as 15% annually; further, of all its peers, it generates the most revenue.
In order for a company to see cost-effective benefits of switching to Bloom Energy, it would take roughly 8 years to break even. However, the fuel cells themselves have an operational life expectancy of only 10 years. Perhaps this level of inefficiency is why this tech that has been around for more than 50 years has yet to catch on in a major way.
So, which is the better investment?
Bloom Energy, with its impressive and varied client list and its emphasis on lowering operational costs, is the clear winner here.
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