Some headline stories have a way of getting buried by urgent news. But investors in hydrogen stocks who read between the lines can sniff out big developments (even if hydrogen lacks a smell). When Congress approved its $900 billion relief bill connected to the novel coronavirus on Dec. 21, it included a nice little provision to extend clean energy tax credits. All hail the mighty H, as in hydrogen stocks!
The extension bodes incredibly well for companies producing hydrogen fuel and fuel cells for alternative energy vehicles. Once President-elect Joe Biden takes office, it’s an odds-on bet those credits will be further renewed and even expanded as his administration tackles climate change and renewable energy development head on.
The next question for hydrogen stocks surrounds which ones could benefit from the changing of the guard and the change in climate-change attitude in the White House. And that’s no small change where investors are concerned. The action will of course run concurrent with the further development of an industry still in its initial stages of rapid growth. Here I’ve identified seven stocks investors should seriously consider as 2021 kicks into gear:
- Plug Power (NASDAQ:PLUG)
- Ballard Power Systems (NASDAQ:BLDP)
- Cummins (NYSE:CMI)
- Air Products & Chemicals (NYSE:APD)
- FuelCell Energy (NASDAQ:FCEL)
- ITM Power plc (OTCMKTS:ITMPF)
- Bloom Energy (NYSE:BE)
And so with hydrogen ruling as the most abundant element in the universe, it’s time to see whether it can produce at least some profits to match.
Hydrogen Stocks: Plug Power (PLUG)
While Plug Power once fit the dictionary definition of bumbling upstart, PLUG stock did anything but bumble in 2020. Investors can only hope the company’s hydrogen fuel cell systems work as well, as PLUG stock finished the year up 950%. Compare that to the S&P 500, which rounded out 2020 up 16%.
When a stock explodes this much, the inevitable question rises as to whether it has any more room to grow. Plug Power did shed close to a quarter of its value in October but has bounced back nicely, setting it up for a banner 2021. Bullish investors can rightly point to the fact that it’s no upstart, closing in on a quarter century in business. Yet after all this time, it has still failed to produce a profit. Thus the inevitable question arises: Is PLUG stock sitting on a hydrogen bubble?
Wall Street has sent vastly conflicting signals. In the third quarter, the company missed projections badly, reporting a loss of 11 cents per share when the analyst consensus came in at 7 cents. The first three quarters for 2020 came in at a loss, with Q4 expected to land in the red. Yet, 10 of 11 analysts call PLUG stock a buy, based in large part on its gross billings of $125.6 million in Q3, which reflected year-over-year growth of 106%. It also made for the best third quarter run in the company’s history.
Ballard Power Systems (BLDP)
While namesake founder and Canadian geophysicist Geoffrey Ballard passed away in 2008, he’d no doubt be pleased with the progress his company has made in the years since. In January 2020, Ballard Power announced that its fuel cell technology and products had powered more than 18 million miles of commercial and medium-duty vehicle use.
That announcement set the stage for a hydrogen-fueled year for investors, as BLDP stock tripled in price. The performance has left analysts impressed, with 9 out of 11 calling it either a buy or overweight, and none labelling it a sell.
Ballard also seemed to be inching ever closer to profitability, as analysts have forecast a loss of 3 cents per share in the first quarter of 2021 — a 25% improvement from Q1 2020. And just weeks ago, Ballard announced it would equip 10 public transport busses in Holland. That marks a potential gateway to much larger orders there and throughout the European Union.
In September 2019, this Columbus, Indiana company completed a $290 million deal to acquire Hydrogenics. The move made Cummins a leader in hydrogen fuel cell production. Investors delighted in the deal, sending CMI stock up 55% since.
Cummins is a financial outlier as many hydrogen stocks go. Why? Prepare to catch your breath: It actually makes money. The strong price-to-earnings ratio of 21.40 results in part from the fact that this isn’t a pure play for hydrogen fuel cells. Cummings also has stakes in diesel, natural gas, electric and hybrid powertrains.
In 2020, CMI stock blew away every analyst projection for the first three quarters at a rate of between 38 and 100%. The six analysts weighing in with a buy rating seem firmly cognizant of this, though it’s difficult to fathom why 15 analysts call CMI stock a hold. Perhaps they prefer company losses and underperformance share-wise, a factor common to many share price rock stars. Best to ignore them and put your money down on a solid performer that isn’t going anywhere. Cummins is more than a century old.
Air Products & Chemicals (APD)
Although it’s not widely known for its presence among hydrogen stocks, this 80-year old company ranks among the pioneers in producing hydrogen for transportation fuel. In 1993, Air Products & Chemicals deployed its first hydrogen fueling station.
APD stock also stands to benefit from the company’s leadership in mounting the world’s largest carbon-free hydrogen project. Based in Saudi Arabia, the new $5 billion facility will supply 650 tons per day of carbon-free hydrogen for transportation globally. Non-oil fuel in Saudi Arabia? Something wonderful and strange there, I’d say.
In the meantime, ADP stock enjoyed a robust 2020, up 21%. Go back another year and it’s up 69%. Look ahead to 2021 and there’s every reason to expect a full fuel tank for the APD stock faithful.
FuelCell Energy (FCEL)
Based in Danbury, Connecticut, FuelCell has attracted attention for its SureSource hydrogen power plants. These facilities, once built, boast the added capability of generating hydrogen streams suitable for transportation needs.
For much of the year, this elicited yawns from investors. But after spending the entirety of 2020 piddling around in $2-per-share territory, FCEL stock took off like hydrogen-powered rocket. In two short months, it spiked 420%, with most of the action taking place in the last half of November.
Whether you missed out or made out, you may well ask, “What happened?” As it turns out, the recently passed Covid-19 stimulus bill has created a veritable investor stampede on renewable energy investments. Zacks Investment Research has also lifted FCEL stock from “hold” to “buy.” It happened on Jan. 4, 2021. Happy Fuel Year!
ITM Power plc (ITMPF)
ITM Power makes polymer electrolyte membrane electrolyzers, a product worth a fortune if you charge investors a dollar a pop until they can say it five times fast. As for the more practical use, the technology splits water into oxygen and hydrogen, the latter used for fuel cell products.
And these days, the U.K. company sure makes this business look like turning water into gold. Although ITMPF stock cratered in March (a market-wide reaction to the novel coronavirus), it was already in penny stock territory to begin with. But since March 23, it has risen 550%.
Should you buy this hydrogen stock? The technical term used by Wall Street analysts is “heck, yeah.” The number of analysts covering ITMPF stock has jumped from four to six over the last month, according to the Wall Street Journal. Five of the six call it a buy. This comes despite Brexit as a potential hurdle but only to a point. ITM announced on Dec. 7 that it had reached agreements two with key strategic partners to collaborate on clean hydrogen projects in Europe.
Bloom Energy (BE)
Back in September 2020, InvestorPlace’s Chris Markoch called BE stock one of the four hydrogen stocks to take seriously. He pointed to Bloom’s announcement three months prior that it would supply a megawatt of hydrogen-powered fuel cells to Korea’s SK Group in 2022.
Had I listened to Mr. Markoch, let’s say to the tune of $1,000, I’d be $740 better off today. And I’ll wager that a Joe Biden presidency will only make for rosier prospects where BE stock is concerned.
While earnings per share run in the red, BE stock has surpassed analyst expectations for four consecutive quarters. I’d expect a rally if it beats the current projection for the fourth quarter of 2020. It straddles the fence at zero, so an earnings beat would put it in positive territory.
And it would only be fitting, since hydrogen has an element charge of +1.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.