Why Bloom Energy Stock Dropped on Tuesday

Bloom Energy (NYSE: BE) delivered a powerful earnings report last week, but that good news isn't helping this hydrogen fuel cell company Tuesday. Reports of a big "block trade" -- a large shareholder selling 3 million shares of Bloom all at once -- have investors spooked.

After dropping by more than 13% in morning trading, as of 12:20 p.m. ET, Bloom Energy stock was down by about 5%.

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Bloom Energy earnings

Bloom Energy beat analysts' forecasts for Q4 with a stick on Thursday, reporting adjusted profits of $0.43 per share where analysts foresaw only $0.31, and revenue of $572.4 million, which was much more than forecast. (GAAP profits also rose impressively to $0.38 per share versus just $0.02 in the prior-year period.)

2024 was a record year for revenue at Bloom, with sales rising 10% from 2023 levels to $1.5 billion. And the company finished the year strong, with 60% sales growth in Q4, and a huge 1,240 basis point increase in gross profit margin.

Bloom even hung its hat on the AI revolution, saying that its hydrogen power boxes are "the solution of choice for powering AI," and asserting that it was ready to provide gigawatt-scale hydrogen fuel cell power for customers this year. Management forecast that sales would grow to approximately $1.75 billion in 2025, ahead of Wall Street forecasts.

Is Bloom stock a sell?

All this good news was undone in a moment, however, when on Monday night TheFly.com reported that a shareholder had engaged Morgan Stanley to help it sell 3 million shares of Bloom Energy at once, at a price between $23.25 per share and $23.42 per share -- the top of the range being where Bloom stock closed Monday's trading session -- and that the shares ended up selling at the very bottom of that range Tuesday.

Someone apparently wanted out of Bloom stock in a hurry, and that impatience is panicking other shareholders. Nor can I necessarily say that selling is a bad idea. Bloom remains unprofitable, and while it's free cash flow positive, it's trading for more than 160 times cash profits.

It's an overpriced stock, and overpriced stocks probably should be sold.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.