As climate awareness and climate action are on the rise, sustainable energy is the next big frontier in technology and energy. Here we compare two sustainable energy companies operating in very different segments of the energy sector.
But which stock, FLSR or BE, will give you a better ROI?
First Solar is the largest solar equipment manufacturer in the US. The company has a global manufacturing nameplate capacity of 6.7 GW. The company operates 3 manufacturing plants globally. The company sold 6.1 GW of equipment in 2019. The company has a market cap of $8.5 billion and a P/E of 38.4.
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 $3.18 billion.
First Solar is far more focused on commercial and utility-scale installments than consumer or B2B sales. The company offers all-in-one installation, maintenance, and project financing solution to large-scale clients and this segment makes up more than half of its 2019 revenue. It is also worth noting that this segment has bigger margins compared to just module sales. The company also has a technological advantage as their Cadmium Telluride(Cd-Te) semiconductor film technology is the most efficient in the world with 22.1% cell efficiency and 18.2% module efficiency.
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.
First Solar reported its Q3’20 numbers and reported a 70% YoY growth in net sales. The company reported net revenues of $928 million, operating income of $207 million net income of $155 million. Net income is up nearly 5x from Q2 and Q3’19.
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.
While Bloom has developed a well-designed product that has carved out its own niche market, it lacks the practicality and convenience of solar whilst remaining uncompetitive to traditional power and solar in-terms of price.
On the other hand, solar has become the most dominant form of sustainable power due to technology advancements and plummeting prices, thus making First Solar a far better investment. Also, First Solar has a far better track record of scaling production and maintaining profitability. FSLR stock price is now down almost $20 from its all time high. Could this be a good moment to buy FSLR shares again?