Canadian Solar (NASDAQ:CSIQ) and Bloom Energy (NYSEBE) shares are down on Wednesday, but which stock is better investment for 2021.
These companies operate in two very different spectrums of the energy sector. While Canadian Solar is a solar panel manufacturer, Bloom Energy is a micro-grid on-site energy generation company.
Canadian Solar is a Guelph based manufacturer of Solar equipment. The company operates 17 production facilities all over the world. As of 2020, the company has 5 GW of silicon wafer capacity, 10 GW of solar cell capacity, and 14 GW of module capacity. The company sold 8.6 GW of solar equipment in 2019.
Bloom Energy is a California headquartered company that develops on-site fuel storage and electricity generation systems. The company was founded in 2001 and made its first public appearance in 2010. Bloom’s main product is a solid oxide fuel system that produces electricity on-site and on-demand by combining natural gas and air without combustion. The company went public via IPO in 2018 and raised $270 million. Bloom has a market cap of $3.20 billion.
Bloom Energy’s flagship product is the Bloom Energy server, also known as a micro-grid. Bloom’s Energy Server combines warm air, steam, and natural gas for on-site and 24/7 on-demand energy generation. The company saw a surge in demand for its server from commercial customers such as Amazon, Google, etc. due to the booming cloud business. Cloud and data-center operators have been willing to shell out big money over the past few years for on-site and 24/7 systems like Bloom’s to minimize server downtime which can cost them $9000/minute. However, Bloom has failed to realize its vision of putting a Bloom Energy server in consumer homes due to costs. Without subsidies, Bloom costs 13.5 cents/kWh, compared to grid prices of 10 cents/kWh. It should also be noted that Bloom’s system is not entirely green and produces CO2 as a by-product, but much less than traditional power plants.
Canadian Solar is a fully vertically integrated setup and does outsource any production. The company is more focused on industrial and government projects. Also, the company is the market leader in operational efficiency, with a negative cash conversion cycle, low inventory, and near zero-bad debt on credit sales. The company also has the biggest direct channels in the solar industry, leading to a sustained competitive advantage and a higher ASP(Average Selling Price).
For Q3, Bloom reported $200 million in revenue and a net loss of $12 million. EBITDA for the quarter was $27.7 million and operating margin improved from 2.7% to 7.7% YoY. The company repaid $249 million worth of 10% promissory notes due 2021 and the outstanding $79 million on its 10% secured notes due 2024. The company refinanced at a much lower rate of 2.5% by selling $230 million convertible senior notes due 2025. With a cheaper debt and a growing operating margin, Bloom Energy is set to bloom.
In Q2, Canadian Solar reported revenues of $696 million, down 33% from Q2 2019 revenues of $1.036 billion and shipments of 2.9 GW. The company reported gross margins of 21.2%. The company has a market cap of $2.36 billion and a P/E of 9.25. Canadian Solar is due to report Q3 on November 19.
While both companies have well-designed products and improving finances, Bloom Energy has not been able to find any mass-market success for its energy server. On the other hand, Canadian Solar is operating in the burgeoning solar sector that is set for double or triple-digit growth over the next years. Canadian Solar also has a strong track-record of scaling its business along with profitability, thus making it a better choice for investors.