Bloom Energy stock is in the spotlight this week because of its role in the beleaguered data center project in New Mexico. BE dropped to $254 on Thursday, before recovering a bit to the current $267. It remains about 25% below its highest point this year, and has formed an island reversal pattern.
Bloom Energy stock wavers as Project Jupiter project faces headwinds
BE stock has slumped into a bear market this year, mirroring the performance of other companies in the AI data center industry. Its challenges have been escalating because of a large data center project in New Mexico that has faced substantial opposition from the locals.
In a statement on Thursday, Oracle, its developer, issued a force majeure notice related to the power supply, the developer, and a unit of Blue Owl. A force majeure clause normally excuse a party from contractual obligations when events outside its control get in the way. In this case, Oracle has faced local opposition about water resources and how it will power the data center.
This announcement came as banks that provided it with capital struggled to offload about $18 billion to the market. Still, Oracle maintains that it does not expect the project to delay and that it was still on course.
Project Jupiter is an important part in Bloom Energy’s business since Oracle plans to use its fuel cells on the project. These cells are powered by natural gas, which some environmentalists in New Mexico are opposing.
Bloom Energy’s business is doing well
The most recent results showed that Bloom Energy’s business was doing well, with its revenue growth continuing because of the AI boom. Its revenue jumped by 165.5% in the second quarter to $1.06 billion. It had made $401.2 million in the same period last year.
Analysts predict that the revenue growth will continue in the foreseeable future. The average estimate among analysts is that its revenue will jump by 105% this quarter to $1.06 billion. For the year, the estimate is that it will hit $4.12 billion, up by 103% from the $2.02 billion it made last year.
This growth explains why analysts are largely bullish on the company. UBS sees the stock hitting $300, while Susquehanna expects it to jump to $298. BTIG has a target of $298, while JPMorgan expects it to hit $314.
There are risks when investing in Bloom Energy. One of them is that data center project cancellations are rising in the United States, a move that may impact its project pipeline.
The other one is that it is a highly overvalued company, with a forward price-to-earnings ratio of 98.55, much higher than the sector median of 19. This means that the management needs to execute perfectly.
Bloom Energy stock price technical analysis
The daily chart shows that the BE stock has moved sideways in the past few days. This consolidation started after the stock made a small gap on September 8. As such, it is in the process of forming an island reversal pattern, a common bearish reversal sign in technical analysis.
The stock is also slowly forming a bearish divergence pattern, with the Relative Strength Index (RSI) making a series of lower lows. Therefore, the stock will likely reverse, potentially to $200 and then resume the uptrend.