Jefferies Reiterates Hold Rating on Bloom Energy Corp. (BE), PT $11, Previews Q3 Report

Jefferies analyst Lloyd Byrne reiterated a Hold rating and $11.00 price target on Bloom Energy Corp. (NYSE: BE).

The analyst comments "Korean Auction Results Not As Promising: According to Dealbook News, a South Korean publication, SK won only ~50MW of fuel cell orders in the auction, while Doosan won ~120MW. Recall, the auction process in Korea evaluates bidders on two main criteria including (1) Price (60%) and (2) Non-Price (40%), including domestic content, and efficiency among others. The publication noted that the price gap between Doosan and SK has narrowed, but driving the win was Doosan's domestic content whereas BE currently only has a light-assembly facility in Korea. We wonder whether this auction sets a precedent for more domestic content wins in the future vs pricing or efficiency. In response to the auction results, Bloom issued a press release expressing its confidence in relationship with SK and noting shipment volumes to Korea will be similar in 2024 and the coming years vs recent years (~$400mn/yr by our estimates). Additionally, Bloom noted that the auction is just one avenue for the sale of its fuel cells into the Korean market and SK has other development projects in addition to those from the auction. We expect further clarity on this going into the earnings call. For 1H24, SK accounted for 37% of BE's total revenue and 55% of Product revenue, or $209mn. At $3.3/MW, this would imply ~65MW sold to SK in 1H24. Although, given potentially lower pricing in Korea (due to competitve bidding) vs BE's disclosed ASPs, the implied MW shipped could be marginally higher in 1H24. Recall, SK has committed to purchase 500MW of fuel cells from 2024 to 2027, with quarterly commitments starting 2025. 3Q24 Preview: We estimate 3Q revenue of $357mn, -10% below consensus of $394mn. We expect 3Q to be sequentially better than 2Q but below 3Q23 levels, due to the PPA flip. For 3Q, we expect gross margins to shake out at ~27%, implying a significant step-up in 4Q to meet the FY target of 28%. While we do bake in a step up in both revenue ($506mn vs cons of $498mn) and margins (34% vs cons of 31%) in 4Q, our FY GM shakes out at 27% vs cons of 26%. We expect 3Q street estimates to trend lower and 4Q to remain a show-me story. Receivables and Inventory Update: We await further clarity on SK receivables of $345mn (or 66% of receivables). Recall, during the 2Q call management noted it expects positive cash flow from operations in the 2H, driven by inventory and receivable conversion. Our understanding is that the BE inventory held by SK are all designated to specified projects and are waiting to be deployed. Timeline for that remains uncertain."

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Shares of Bloom Energy Corp. closed at $10.91 yesterday.

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