This data center power play has room to run, charts show
The demand for power consumed by data centers is expected to more than double from 292 terawatt-hours (TWh) in 2026 to 606 TWh by 2030, according to McKinsey & Company. In percentage terms of total U.S. power demand, that’s a jump from 6.5% in 2026 to 11.7% by 2030. If you think that’s an overly aggressive projection we’ve already seen power demand by data centers nearly double from 147 TWh in 2023 to 292 TWh in 2026. Hyperscalers and colocation operators recognize that should the projected power demand play out as expected, that demand will likely be filled “behind-the-meter” (BTM) as the grid will lag. The company in focus this week is Bloom Energy (BE) . According to the company’s research, around 30% of new data centers are expected to rely on on-site/BTM power by 2030, which is a significant uptick from prior estimates. Bloom Energy is a co-located power solution that builds fuel cells that, according to its website, “converts natural gas, biogas, or hydrogen into electricity without combustion, resulting in low or no CO2 emission.” Bloom has strong strategic partners in the data center space including Oracle, Brookfield, AEP, and Equinix. The fuel cells are not easily replicated by competitors. While Bloom has competition already, the company holds a solid patent portfolio and has early-mover status. The bearish side is the valuation is extremely high, combined with the potential challenge of converting pipeline orders into booked revenue and profitability. The ordering timelines are long and BTM deployments are capital intensive. Permitting is extensive, and long-term contracts will likely delay revenue hitting the books. Plus, the company will likely deal with changing regulatory environments around its natural gas use and emission standards. We last wrote about Bloom Energy in August when the stock was trading at around $42. It’s currently trading at around $162. I think there’s more room to run. The weekly chart shows a wave five and Fibonacci ratio zone that will serve as our target at $223 to $245, approximately 35% higher from current levels. As mentioned the valuation is extreme with 67 cents GAAP EPS expected in 2026 for a sky-high price-earnings ratio of 255 times this earnings. Analysts are looking for $2.83 in EPS in 2027 and $4.22 in 2028 for growth rates of 221% and 64%. With that kind of growth, that’s how you can begin entertaining the thought of buying a stock with a current PE of 255. However, do not consider this if you are not experienced in risk management, especially in this very range-bound choppy stock market environment. Turning to the daily chart, we see the resistance level highlighted in yellow was broken around $145 as we’ve been adding this stock back to our Active Opps holdings on Jan. 12, Jan. 23, and Jan. 27. Again, I want to stress how choppy and hesitant the broader stock indexes are, so I want to be sure that risk management is top of mind for you as we attempt to tag our $223 to $246 target. Earnings are scheduled for this Thursday, Feb. 5. In the charts below, we’re looking at GAAP expectations of 10 cents per share and non-GAAP, not shown, of 24 cents a share. The comparable to Q4 2024 is high — 38 cents per share on a GAAP basis and 43 cents a share non-GAAP — because the company saw a big surge in sales volume beyond any seasonal uplift that was priced in after the Q3 2024 earnings with increased guidance for the quarter we’re going to compare against on Thursday. Again, I can’t stress how tepid and schizophrenic this market is acting right now, so I will carry the position in but likely have some downside hedges in the form of put spreads for our clients at Inside Edge Capital. In our Active Opps portfolio, we hold a 7.43% allocation. — Todd Gordon, Founder of Inside Edge Capital, LLC We offer active portfolio management and regular subscriber updates like the idea presented above. DISCLOSURES: Gordon owns BE personally and in his wealth management company Inside Edge Capital. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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