Jefferies Lowers Bloom Energy (NYSE: BE) Price Target Amid Cash Flow Scrutiny

By Tony Dante23 Oct, 22:19From Financial Modeling Prep

Key points

Jefferies lowers Bloom Energy (NYSE: BE)'s price target to $242, implying 25.2% upside despite a recent stock dip.
Bloom Energy reported strong Q3 revenue of $1.24 billion and adjusted earnings of $0.94 per share, both exceeding forecasts.
Despite revenue growth, significant negative free cash flow of more than $180 million raises investor concerns about cash needs for expansion.

The stock of Bloom Energy (NYSE: BE), which makes fuel cell systems that supply power to businesses and data centers, recently saw its price target lowered. Jefferies analyst Julien Dumoulin-Smith reduced his price target to $242 from $289. With shares at $193.30 when the update appeared, the new target implies about 25.2% upside.

The lower target comes as investors weigh Bloom Energy’s growth against its cash needs. Shares fell 11.24% to $193.30 on Oct. 23, as highlighted by The Motley Fool. Trading volume reached 34.7 million shares, about 117% above the three-month average of 15.9 million.

Demand from commercial and data center customers helped lift third-quarter revenue 138% from a year earlier to $1.24 billion, above the $1.08 billion forecast. Adjusted earnings reached $0.94 per share, compared with the $0.67 analysts expected. Bloom Energy also raised its full-year revenue guidance.

Cash flow remains the main concern. Third-quarter free cash flow was negative by more than $180 million, compared with expectations for more than $43 million in positive free cash flow, as highlighted by Investopedia. Free cash flow is the cash left after a company pays for operations and equipment. Bloom Energy is spending more to support its expansion.

CFO Simon Edwards says the quarter’s use of operating cash is “not the beginning of a trend” and notes that operating cash flow remains positive for the year to date. Investors still have to weigh that assurance against the cash spent during the quarter, even as sales and earnings beat forecasts.