Why Bloom Energy, ChargePoint, and QuantumScape Soared Today

What happened

Shares of clean energy companies Bloom Energy (BE 4.32%), Chargepoint Holdings (CHPT 13.06%), and QuantumScape (QS 8.00%) soared on Friday, rallying 6.1%, 14%, and 6.8%, respectively, as of 2:14 p.m. ET. Although the broader markets and technology stocks were also up strongly, the outsize gains for these three stocks likely had to do with today’s House vote on the Inflation Reduction Act.

Having already passed the Senate, the Inflation Reduction Act’s centerpiece is the $370 billion in subsidies and credits to spur clean energy investment in the U.S. That stands to benefit each of these three companies.

So what

There are a whole host of tax credits and incentives for clean energy in the bill, spanning both consumer purchases of electric vehicles, battery storage, energy-efficient electric appliances, and energy-saving building upgrades, as well as credits for manufacturing investments related to clean energy technologies.

ChargePoint produces and deploys electric vehicle charging stations, and QuantumScape is an earlier-stage company working on solid-state battery technology for electric vehicles. Only 5% of all new vehicles sold in the U.S. are EVs, and solid-state batteries have yet to be commercialized. So, both companies could use some help. 

Therefore, the $7,500 consumer incentive to purchase a qualifying EV could greatly help ChargePoint’s business, if it leads to a “tipping point” for more consumers to buy EVs over internal combustion cars. Meanwhile, the subsidies for its manufacturing operations would help on ChargePoint’s cost side, too.

Subsidies would be even more of lifeline for QuantumScape, which is actually pre-revenue and inking big losses as it builds its technology and manufacturing operations. In the first six months of 2022, the company burned through about $165 million in cash between operating losses and capital expenditures. Recently, the stock fell after the company filed to potentially sell up to $1 billion in stock, preferred stock, or debt, diluting shareholders further. But if the government helps foot more of the bill, shareholders would make out better.

The biggest winner may actually be hydrogen fuel cell makers such as Bloom. Hydrogen has a lot of industrial use cases, but has traditionally been made from fossil fuels. However, “green hydrogen,” which Bloom produces, is made from clean energy sources and water, instead of the traditional method of deriving the hydrogen from methane or coal, which releases CO2. Green hydrogen has the potential to greatly reduce the carbon footprint of industrial end products such as fertilizers.

Some analysts believe the subsidies for hydrogen power could cut the cost of manufacturing green hydrogen in half — or even more. That could be a boon for Bloom, which currently has a gross margin only in the mid- to high teens and a history of operating losses.

On its earnings conference call earlier this week, Bloom CEO KR Sridhar said:

[W]e are so excited about the Inflation Reduction Act. This act will enable us to play a pivotal role in accelerating the mission to decarbonize the world. Unlike many other energy companies, there are many facets of the acts provisions where we will be able to participate in a material manner.

Now what

It remains to be seen how these companies will ultimately fare after the passage of the bill, which seems highly likely to take place today and be sent to President Joe Biden’s desk for signing.

However, each of these companies’ growth prospects and profitability outlooks will be boosted in the near term — and perhaps in a game-changing fashion. Therefore, it’s no wonder these stocks are rising today.

Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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