Renewable energy stocks are red hot at the moment. However, much of the euphoria is reserved for electric vehicles (EV) and solar energy stocks, with hydrogen stocks relegated to the background.
After his victory is made official by an Electoral College vote, Joe Biden’s inauguration is expected to occur on Jan. 20. He laid out a comprehensive $2 trillion plan to significantly escalate clean energy in the transportation, electricity and building sectors. Understandably, the plan had a tremendously positive impact on renewable stocks, which are already enjoying a great year.
However, hydrogen fuel companies have been active for several decades. But they are often considered also-rans, and no prizes for guessing why that is the case.
For the longest time, developing a hydrogen-powered vehicle was an expensive affair. However, improving technology makes it cheaper to make hydrogen fuel cell vehicles. At the same time, there are several other areas where hydrogen technology can be used.
With the incoming Biden administration putting the spotlight squarely on renewables and hydrogen technology becoming cheaper, this is fast becoming a great time to invest in the hydrogen energy space.
So, without further ado, let’s look at three hydrogen stocks that are making significant waves:
Hydrogen Stocks: Ballard Power Systems (BLDP)
First on the list of hydrogen stocks to buy is Ballard Power Systems is a developer and manufacturer of proton exchange membrane (PEM), which utilizes hydrogen and oxygen in an electrochemical reaction. If heavy-duty hydrogen-powered transportation grows, then this company will be a prime beneficiary. Ballard has been in the fuel cell business for over 25 years. The company works to position hydrogen-powered technology as a reliable, affordable, and cost-effective solution.
For fiscal 2021, analysts forecast revenue of $127.77 million, a year-over-year increase of 20.79%. In 2022, things are expected to be even better. Revenue will rise 47.67% to finish at $188.67 million.
Ballard established strong partnerships in several parts of the world. The biggest news on that front is the Chinese Weichai joint venture. Ballard produces the membranes that generate power from hydrogen, and its partners manufacturer finished fuel-cell modules for vehicles.
Ballard supply chains in China and internationally will benefit greatly from the joint venture. It’s expected that the cost reduction could be up to 70% for several modules by 2024. Ballard will receive 49% of revenue from module sales, and the Weichai JV will be an important part of the company’s expansion efforts in non-Chinese markets.
There are also positive developments on the U.S. side. Hydrogen fuel cell vehicles are most useful when you have a scenario that requires rapid refueling or improved weight-to-range ratios like long-haul trucking.
California will require every new truck sold to be zero-emission by 2045. Other states, including New York, Pennsylvania, New Jersey, Massachusetts and North Carolina, have inked a non-binding memorandum of understanding outlining similar zero-emission sales by 2050. A significant number of these vehicles will be hydrogen fuel-cell cars, a net positive for BLDP stock.
Cummins (CMI)
Cummins focuses on the design, manufacturing, and distribution of engines, filtration and power generation products powered by a wide range of sources. Founded in 1919, it produces diesel, natural gas, electric and hybrid powertrain components. So, you can understand that it’s not a one-trick pony.
Cummins generated roughly $14 billion in net sales in the first three quarters, a 28.57% drop from approximately $18 billion in 2019. You can chalk that up to the novel coronavirus pandemic negatively impacting business in North America and China.
However, the recent quarter marked a recovery of sorts, with EPS of $3.570, beating analyst estimates by 47.0%. In fact, despite the pandemic, the company consistently outperformed all analysts’ expectations. Chinese operations, in particular, are coming back strongly.
Now let’s talk a bit more about renewables. The company’s new power division focuses on new and emerging alternative power technologies. It is subdivided into two segments: electrified power, and fuel-cell and hydrogen technologies, which have seen more than 100% year-over-year growth over the year-ago period.
As the U.S. economy shakes off effects of the pandemic, we will see explosive revenue growth rates of 16.93% and 19.66% in fiscal 2021 and 2022, respectively. Hence, the blip in performance is temporary.
FuelCell Energy (FCEL)
We polish off this hydrogen stocks list with the industry leader in fuel cell technology. It designs, manufactures, operates, and services direct fuel cell power plants powered by natural gas and biogas. FuelCell is producing 10 Mwh of energy through its power plants.
Due to the fuel cell power plants’ distributed nature, they can serve various applications, including but not limited to hospitals, forklifts, automobiles, buses, boats, motorcycles and submarines.
However, it’s important to note that FCEL is volatile. It has a one year beta of 1.64. That means the security’s price tends to be more volatile than the market. We saw some of that volatility earlier this month when shares fell 25%.
InvestorPlace’s Sarah Smith outlined the reasons for the massive stock price movement in an excellent piece. I won’t go into detail here. But volatility is part and parcel of investing in the stock.
However, if you have to invest, you might as well pour your capital into a global leader in delivering clean, efficient and affordable fuel cell solutions. The fact that it has reported better year-over-year results across the board is the icing on the cake.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
