Bloom Energy (BE 0.46%) shares have soared over 700% in the past year, with investors predicting that artificial intelligence (AI) data center growth will continue to accelerate its fuel cell business. The stock may have jumped too far, too fast, though.
Some investors have begun questioning the high level of optimism, and Bloom shares sank 13% in March, according to data provided by S&P Global Market Intelligence.
Image source: The Motley Fool.
Business strength and valuation
The most obvious reason for Bloom Energy’s poor March performance is its valuation. After a parabolic move higher, the stock has disconnected from the underlying business fundamentals. The excitement for its growth potential is understandable. After posting $2 billion in 2025 revenue, management expects sales to soar by at least 55% this year.
Yet even at $3.3 billion, the high end of the company’s revenue guidance, the stock would trade at a price-to-sales (P/S) ratio of about 11.5. That’s not sustainable, and I would expect the stock price to correct before sales are expected to spike. That’s because capacity constraints will limit sales in the short-term. To its credit, the company says it can expand capacity quickly and with relatively low up-front costs.
In its fourth-quarter conference call, CEO K.R. Sridhar spoke to potential capacity concerns, stating, “You can count on us to deliver timely power. We will deliver our power platform faster than you can build your greenfield facilities, be it an AI factory or a C&I (commercial and industrial) facility.”
Today’s Change
(-0.46%) $-0.63
Current Price
$135.00
Key Data Points
Market Cap
$38B
Day’s Range
$133.57 – $140.30
52wk Range
$15.15 – $180.90
Volume
71K
Avg Vol
11M
Gross Margin
30.89%
Growing short interest
Orders justifying capacity expansions may come pouring in to Bloom as tech companies continue to invest in data center construction. But some investors see a near-term stock price correction for Bloom. As of mid-March, short interest in the stock had jumped from the previous month and represented about 10% of the public float.
Wall Street analysts have also begun to sense that the stock is overvalued. Late last month, Jefferies analysts maintained the equivalent of a sell rating on Bloom shares and even lowered their target price from $102 to $97 per share.
Stock price swings
Increasingly high expectations partially drove that view. Bloom will likely have to announce both large new orders and expansion plans to fulfill those orders to avoid a stock correction. New large deals may be announced. The company brought in a new CFO with a background in computing. Simon Edwards came from AI-inference company Groq, so he knows the world of high-compute-capacity data centers.
Bloom Energy’s on-site power solutions are undoubtedly in demand. Whether powered by natural gas, hydrogen, or biogas, the company offers customers a range of options. For investors, though, it might be best to purchase Bloom shares in increments as the stock is likely to pull back again as it did in March.
Howard Smith has positions in Bloom Energy and has the following options: short May 2026 $60 calls on Bloom Energy. The Motley Fool has positions in and recommends Bloom Energy and Jefferies Financial Group. The Motley Fool has a disclosure policy.