The little-known company's stock has hit a record. Why does it benefit from Oracle's success?

Shares of Bloom Energy, an energy company with a capitalization of $17 billion, hit an all-time high after Morgan Stanley sharply raised its outlook for the company. Bloom Energy has received a contract for servicing Oracle data centers, and analysts believe that this will be a turning point for its development. The company's stock, which is already up more than 200% this year, could continue to rally, Wall Street said.

Shares of Bloom Energy jumped by almost 9.5% at the trading in New York on September 16, having updated the historical maximum. The rally in the company's securities began after Morgan Stanley analysts significantly improved their forecast for the company, Seeking Alpha wrote.

They noted that the company has a stronger case for rapid growth due to increased demand for energy for data centers.

A Morgan Stanley analyst nearly doubled their target price on Bloom Energy shares, from $45 to $85, even though they are already up 230% since the beginning of the year, Seeking Alpha writes. Their forecast implies an increase of another 16% relative to the closing price on Sept. 16.

Bloom Energy securities were adding 0.6% in the premarket on Sept. 17.

Analysts at the bank called Bloom's recent deal to supply fuel cells to Oracle's data centers a watershed moment for the company, Seeking Alpha writes. The cloud giant recently reported that in the last quarter the value of its orders reached a record $332 billion. This report demonstrated the rapid growth in the need for computing power, which, in turn, increases the demand for reliable energy sources.

"Bloom has an attractive partner in Oracle, and it's one of the few companies that can ramp up quickly," said Morgan Stanley analyst David Arcaro.

Bloom's ability to rapidly expand production capacity and deliver fuel cells on a tight schedule gives it an advantage amid years of delays faced by utilities and data centers in connecting to traditional power grids, the analyst said.

"Bloom executives said that deliveries for Oracle's first data center will begin within 90 days and that the company will service 'many' more Oracle data centers in the future," Business Insider quoted Arcaro as saying.

Bloom intends to invest $100 million to double its annual production capacity to 2 GW by the end of 2026, and expects new orders from both so-called hyperscalers and other OEMs in the AI ecosystem.

Morgan Stanley now forecasts Bloom's compound annual average revenue growth rate at 37.5% through 2030 versus the previous 26.9%. In the optimistic scenario, assuming that Bloom can take a more significant position in the global energy market, analysts foresee a rise in the share price to $185 (upside of about 150%). The pessimistic scenario suggests that quotations could fall by half - to $37, if growth and margins turn out to be lower than expected.

Last week, RBC raised its target price on Bloom Energy shares from $35 to $75 and reiterated a buy recommendation on the stock with an "outperform" rating. This assessment almost corresponds to the current share price on the market.

Bloom Energy shares have an average recommendation of "buy" (Overweight rating) and an average target price of $42.8, according to a survey of analysts by FactSet cited by MarketScreener. That's 70% below the stock's closing price on Sept. 16.

This article was AI-translated and verified by a human editor