Bloom Energy (NYSE:BE) and Plug Power are both fuel cell developers and manufacturers. With climate action on the rise, sustainable energy is one of the hottest market sectors as investors hope to find the next multi-bagger. Hydrogen and other fuel cells have their share of skeptics and proponents, but they are widely touted as the future replacement of fossil fuels due to the erratic nature of wind and solar.
But which stock is a better buy for 2021, PLUG or BE?
Bloom Energy is a California headquartered company that develops fuel cell 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. The company went public via IPO in 2018 and raised $270 million. Bloom has a market cap of $2.84 billion.
Like Bloom, Plug Power is a developer of hydrogen fuel storage and electricity generation systems. However, they also develop storage systems and hydrogen engines for commercial vehicles like forklifts, cargo vehicles, drones, etc. The company went public in the late ’90s and was a stock market darling during the dot-com bubble.
The stock was moving sideways from then until Amazon inked a deal with a company for its fulfillment centers that included stock-warrants. The company has a market cap of $9.5 billion and is up 600% this year after outperforming projections for the previous two quarters.
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 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.
Companies like Amazon and Google have been willing to shell out big money 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.
Plug Power manufacturers complete hydrogen power systems for its customers, who are all commercial ones. The company has a number of verticals including on-site hydrogen storage and electricity and hydrogen powertrains for a variety of commercial applications. The company has recently revealed its roadmap for the next 4 years, at the end of which it aims to have $1 billion in revenue and $200 million in EBITDA.
The company is currently the biggest buyer of liquid hydrogen in the world. PlugPower has plans to generate $200 million in revenue from on-road applications. Their ProGen hydrogen system is based on a modular philosophy and can power electric motors from sub-1k Wh-250kWh, making it applicable to all classes of vehicles, from consumer to freight. The company plans to enter the hydrogen production market and target average daily production of 100 tons by 2024.
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.
For Q3, PlugPower outperformed all expectations and its own guidance by reporting revenues of $125 million, up 106% YoY, and 74% QoQ. The company has raised its 2020 guidance from $310 million and $330 million. The company deployed a record 4100 fuel cell systems and 13 hydrogen refueling systems. Adjusted EBITDA for the quarter was $24 million, which is very promising as it is already well above the company’s target of 20% operating margin by 2024.
While both companies have performed very well this year, PlugPower is definitely the better option as their hydrogen-based product has a far brighter future than Bloom’s natural gas. Also, PlugPower has an impressive vehicle powertrain vertical that could be a massive wealth creator once hydrogen infrastructure improves.