With climate awareness on the rise around the globe, the next few years will see a booming sustainable energy segment. While Bloom Energy’s (NYSE:BE) product is an on-site fuel cell electricity generation system, JinkoSolar is the largest solar equipment manufacturer in the world.
But which stock is a better buy going forward, JKS or BE? Here is what I think.
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 $3.00 billion.
JinkoSolar is undoubtedly the largest solar equipment manufacturer in the world. Jinko has an annual capacity of 11 GW of solar cells, 25 GW for solar module assembly, and 20 GW for silicon wafers. The company has 7 production facilities around the globe. The company sold 14.2 GW of solar equipment last year. The company has a market cap of $2.89 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.
JinkoSolar operates an asset-light-manufacturing business model. The company outsources a significant portion of the most capital intensive component of the product portfolio, the PV cell production. The company makes up for the extra-cost with low leverage and debt expenses coupled with massive economies of scale on other components. JinkoSolar also has a massive advantage over Bloom as it is domiciled in China, where annual solar installations are expected to top 60GW(4x 2019 Jinko sales) a year, thus presenting a huge opportunity for the company.
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 Q2’20, JinkoSolar reported revenues at $1.2 billion on shipments of 4.4 GW, up 22% YoY. Shipment growth from Q2 2019 was 32%. Despite, the 32% growth in shipments, revenue was lower because of lower average selling prices this year. The company has a 17.9% gross margin. The company has a market cap of $2.8 billion and a P/E of 15.3.
While Bloom Energy has designed a unique energy product, it is still far more expensive than solar, which is currently by far the cheapest form of renewable energy in the world whilst also being far more uncomplicated to maintain and install. Also, compared to Bloom, JinkoSolar has a far more dominant position in its market, thus making it a better stock for investors.