According to Morgan Stanley, this stock is a top pick in the clean energy market that could nearly double
According to Morgan Stanley, Bloom Energy Corp. $BE-1.5% some promising opportunities.
The bank called this stock a top pick and reiterated its "overweight" recommendation on the stock. It also maintained a $29 price target, meaning the stock could jump 92% from where it closed on Tuesday.
According to analyst Andrew Percoco, Bloom Energy is "our top pick in cleantech and a key beneficiary of several key themes." He cited the growing value of on-site power generation, or distributed energy, as an example. Growing grid instability and capacity constraints will further support fuel cell manufacturers, Percoco said.
"Growing demand for BE's fuel cell technology, coupled with its ability to consistently reduce the cost of its products by 10-15% per annum, should lead to significant margin expansion (+751 bps from 2022-2025) and FCF generation in 2024 and 2025, which is not reflected in the current valuation," Percoco said. The analyst calculates that the stock trades at a 37% discount to hydrogen peers, based on 2025 enterprise value-to-revenue numbers.
Percoco also expects the Clean Hydrogen Tax Credit from the Inflation Reduction Act to be another upcoming catalyst for consensus revenue expectations between 2025 and 2030.
The firm estimates that in a bullish scenario, the stock could jump more than 75% if Bloom Energy manages to take advantage of "explosive growth" while consistently cutting costs and increasing electricity bills.
The stock added 1.5% in pre-market trading Wednesday. The stock is down 21% through 2023.
UBS upgraded the restaurant tech stock, which could rise nearly 40%
UBS says it's time to "bite the bullet" on Toast Inc. $TOST+0.3%
The bank raised its recommendation on the stock to "buy" from "neutral" in a report on Wednesday. It also raised its target price to $30 from $25, implying 38% upside potential from Tuesday's close.
Analyst Rayna Kumar cited improved potential for quarterly net new business additions in addition to improved margins.
"Toast continues to be well positioned to capture the restaurant industry's ongoing transition from legacy technology to multi-channel integrated software solutions," Kumar said. "While the competitive environment remains intense and macro uncertainty looms, Toast continues to prove itself as a top provider, as evidenced by the recent acceleration in net new establishment additions."
Kumar expects Toast's investments to lead to more than 30% growth in gross profit over the next two years. He adds that the positive macro environment is also improving the near-term growth prospects for the restaurant industry, which could further boost Toast's outlook.
"With the stock trading at just ~0.2x '25E EV/GP/growth, the market is not fully pricing in sustained top line growth, healthy margin expansion and stable restaurant outlook, in our view," Kumar said.
The company is well positioned to capture even more market share due to its expanding solutions offerings and secular demand for point-of-sale technology in restaurants, Kumar said.
The stock rose nearly 4% during the pre-market trading session on Wednesday. Since the beginning of the year, the stock is up more than 20%.