Bloom Energy (NYSE:BE) stock jumped to the crucial resistance level of $252 as investors cheered its S&P 500 Index inclusion. It has also rallied after its strong earnings report confirmed that demand from data center operators was still rising. It has soared by 180% this year.
Bloom Energy Stock Jumps Ahead of S&P 500 Inclusion
BE stock soared after it was confirmed that it will be added to the S&P 500 Index. This is an important move because it enters the exclusive club of the biggest companies in the United States. It is also a major milestone because all ETFs that track the S&P 500 Index like VOO, SPY, and IVV will have to buy its stock.
Bloom Energy’s elevation into the S&P 500 Index happened as demand for its energy solutions jumped amid the artificial intelligence boom. It has already inked deals with some of the biggest companies in the industry like Nebius (NASDAQ:NBIS) and Oracle (NASDAQ:ORCL).
Its demand will likely continue growing because AI investments is not slowing down, with PWC estimating that data center spending will hit $32 trillion by 2050.
The most recent results showed that its revenue jumped by 166% YoY to over $1.065 billion, crossing the $1 billion milestone for the first time. As a result, the management boosted its full-year guidance to between $3.9 billion and $4.2 billion, representing a 100% annual increase.
Benzinga data shows that analysts expect that Bloom Energy’s revenue will continue to grow in the coming years. The average estimate is that its revenue will jump by 65% to $6.8 billion next year. All this is happening as the company continues boosting its margins. The gross margin rose to 33.4% in the quarter, up by 668 basis points from the same period last year.
Valuation Concerns Remain
A key challenge for Bloom Energy is that its stock has become highly overvalued. It trades with a forward price-to-earnings ratio of 93, much higher than the energy sector median of 20. This multiple is also higher than other companies like Nvidia (NASDAQ:NVDA), Micron (NASDAQ:MU), and SanDisk (NASDAQ:SNDK).
The company may also be affected by the rising data center project cancellations in the US now that they have become a political issue.
At the same time, recent data shows that companies that enter the S&P 500 and Nasdaq 100 indices often underperform the market. For example, Nebius, CoreWeave, and Rocket Lab remains in a bear market despite their recent Nasdaq 100 Index entry.
Technically, BE stock has jumped to a crucial resistance level, where it failed to flip above in July and August. Chances are that the stock will continue rising, potentially to its all-time high as investors digest the S&P 500 inclusion news. It will likely retreat after the inclusion.
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