Hydrogen technology has been around for over 20 years. But it’s always been too complicated, too expensive, too “something” to become a viable source of renewable energy. And that’s made it hard for all but the truest of true believers to get excited about investing in hydrogen stocks.
That’s because while hydrogen is a source of clean power, it comes with practical problems. One of the primary problems is that hydrogen is expensive to produce because it does not occur naturally as a fuel. This means that consumer prices make hydrogen products an obstacle. For example, a fuel cell engine can cost up to 10 times as much as a conventional engine. And, like other renewable energy sources, there is no developed hydrogen infrastructure, which further holds back its adoption.
But that may all be changing. Prior to the global lockdown that crashed global demand for oil, many companies were in the process of developing solutions that would give hydrogen a chance to become more than a someday idea. And they’re starting to put their money where their mouth is, at least on paper.
In August, the European Union announced an ambition plan backed by many billions of euros that will enable the continent to derive a substantial share of its energy from hydrogen by 2050.
The good news for investors is that publicly traded companies involved with hydrogen and fuel cell technology offer a long runway for growth. However, many are not profitable yet, which means they carry a sizable risk. But if you’re willing to dabble in the sector here are four of the best hydrogen stocks to consider:
- Bloom Energy (NYSE:BE)
- FuelCell Energy (NASDAQ:FCEL)
- Plug Power (NASDAQ:PLUG)
- Ballard Power Systems (NASDAQ:BLDP)
So, let’s dive in!
Hydrogen Stocks: Bloom Energy (BE)
One reason to like Bloom Energy is that the company has fuel cells (that run on natural gas) running as backup power applications. And in July, Bloom announced it was going to supply a megawatt of hydrogen-powered fuel cells to Korea’s SK Group in 2022.
Moreover, Bloom Energy is attacking the issue of hydrogen fuel differently than the other companies on this list. You can call it the “go big or go home” strategy.
Rather than looking at niche markets, the company is betting boldly on hydrogen’s use in industrial applications. In fact, one of the areas the company focuses on is cleaning the emissions from large container ships. This is not only a hot button topic, but one that Bloom has the technical expertise to manage.
Cutting to the bottom line, though, BE stock is up 117% in 2020. And a big reason for investor enthusiasm is that Bloom Energy has positive operating cash flow. This is due in no small part. In fact, in the last 12 months, Bloom Energy has generated nearly 60% more revenue than its three major rivals combined.
Thus, keep BE stock in mind when you’re looking to add to your portfolio.
FuelCell Energy (FCEL)
On June 12, FuelCell posted revenue that was 21% higher than analysts’ expectations. However, the company delivered earnings per share (EPS) that essentially met expectations with a loss of 7 cents per share. Not surprisingly, FCEL stock jumped more than 20% on the report — but has since given back nearly all its gains.
Nonetheless, an encouraging sign for the company was continued strength in its Advanced Technologies business, which posted a profit of $200,000 in the quarter. That would seem to indicate that the company is still reaping the benefits from its partnership with Exxon Mobil (NYSE:XOM).
That’s the good news. However, the potentially bad news is that while FuelCell is not directly impacted by oil prices, Exxon is. And there is some concern that Exxon shareholders may not be so accepting of its FuelCell investment when the company may struggle to pay its dividend.
Overall, though, that’s the risk of hydrogen stocks. And on the stock chart, the last two months have been very good for FuelCell. At one point, shares of FCEL stock had climbed over 200%. But even with a sharp pullback on June 11 — a move that followed the trend of the broader market — FuelCell shares are still holding an impressive gain.
Therefore, FCEL stock is another great option among hydrogen stocks.
Hydrogen Stocks: Plug Power (PLUG)
If you had to pick a leader in the clubhouse of hydrogen stocks, you’d have to give PLUG stock strong consideration. And the reason is simple: It has contracts with Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), which use the company’s fuel cell technology to power forklifts. In turn, that gives Plug Power a compelling use case — particularly as investors may finally be ready to deal with a world with less demand for oil.
The large elephant in the room with Plug Power, however, is that it has burned through cash at an alarming rate. But, in June, the company acquired a producer of liquid hydrogen that also makes electrolyzers. The upshot it is the company should now be able to capture the profit margin on the hydrogen that Walmart and Amazon use.
With this, Plug Power’s chief executive officer Andy Marsh says the company is confident that the company can increase its annual revenue to $1.2 billion in 2024, which would allow it to have a profit of at least $250 million. That tracks with the forecast from two major analyst firms. S&P Global Market Intelligence claims Plug Power will be profitable in 2023, and Barclays Capital recently initiated coverage on PLUG stock with a $7 price target.
So, when you’re looking at some options to fill your portfolio, check out PLUG stock.
Ballard Power Systems (BLDP)
Collectively, BLDP stock is up more than 115% in 2020. And according to the company’s website, Ballard has “shipped over 670 MW of PEM fuel cell products.” But that hasn’t yet translated to the company’s bottom line.
In its second-quarter earnings report, Ballard continued a pattern of missing on both the top and bottom lines. In terms of revenue, the $25.82 million the company generated was 8% better on a year-over-year basis.
Additional highlights included a 22% gross margin and $170 million in cash. The company also predicted that hydrogen refueling infrastructure may benefit from stimulus packages that are being put in play in Europe, China and the United States.
However, the bottom line only shaved off one point from a loss of six cents per share to a loss of five cents per share.
This just illustrates the problem that Ballard continues to have. It needs to be able to make substantial progress in seeding its technology in markets such as buses, trains, and trucks. And until it does, the company will struggle to be profitable.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.