Fuel Cell Energy (NASDAQ:FCEL) and Plug Power (NASDAQ:PLUG) are up more than 450% over the past 12 months through April 19. However, FCEL stock and PLUG stock are both down more than 30% over the past month.
I recently saw an article on Benzinga that wondered if General Electric (NYSE:GE) should try to buy a clean energy company.
If I were Larry Culp, GE’s CEO, I would definitely look to Plug Power if I was interested in expanding GE Power’s holdings. Alas, I’m not.
So, putting on my GE cap for a second, does FCEL stock have any redeeming qualities that make it a better buy than PLUG?
I’ll consider that very question.
FCEL Stock Is One-Third the Cost
That’s true, at least from a market capitalization point of view. According to Google Finance, Fuel Cell’s current market cap is $3 billion compared to $12.6 billion for Plug Power.
However, from a valuation perspective, they are both around 33 times sales.
As I stated in the opening, if I were Larry Culp, I’d definitely opt for the maker of GenDrive hydrogen-fueled proton-exchange membrane (PEM) fuel cell systems that power forklifts and other material handling electric vehicles (EVs).
The tie-up it’s got with Brookfield Renewable Partners L.P. (NYSE:BEP) to build green hydrogen plants — the first is to be built in South Central Pennsylvania along the Susquehanna River using 100% renewable energy from Brookfield’s Holtwood hydroelectric facility that’s also on the Susquehanna — as part of its goal to produce over 500 tons of hydrogen per day by 2025, is an admirable one.
Fuel Cell brings its SureSource hydrogen plants to the table that can produce on-site hydrogen, ultra-clean electricity, and usable heat. The company’s distributed hydrogen generation will continue to gain believers in the years ahead.
As InvestorPlace’s David Moadel stated in February, FCEL was an early entrant in green technology. It’s finally starting to benefit from being early to the party.
What’s GE’s Angle?
I won’t claim to be an expert on GE’s various businesses. However, after it sold its jet leasing business, GE Capital Aviation Services (GECAS), to AerCap Holdings (NYSE:AER) in March for $24 billion in cash and a 46% stake in the combined entity, it was abundantly clear Culp was moving GE back to its industrial roots.
“This deal marks our transformation into a more focused, simpler and stronger industrial company with leading positions in power, renewable energy, aviation, and healthcare,” Culp said in GE’s March 10 press release he said. “This drastically simplifies GE with one set of financials for these four industrial segments.”
In December, Utility Dive discussed GE’s interest in hydrogen. Specifically pointing to a white paper the company published that stated both renewables such as green hydrogen and gas-fired power and ongoing coal-to-gas conversion is the best way to reduce carbon emissions in the near term.
The company is undertaking several decarbonization pilot projects in 2021 and 2022 utilizing hydrogen fuel. The goal is to ensure that it has both gas-powered and hydrogen-powered turbines in the future. It already has turbines that can burn up to 50% hydrogen when mixed with natural gas. It’s aiming to reach 100% by 2030.
So, there’s no question GE would be interested in both companies.
FCEL Stock vs PLUG Stock: Which to Buy?
Both companies bring something to the table that might entice GE.
My layman guess is that Plug Power is more attractive because the five green hydrogen plants it is building will produce far more clean energy needed to power GE’s turbines in the years ahead than Fuel Cell’s SureSource onsite hydrogen plants. But that’s just a theory.
However, there’s no question that GE is in a position to make acquisitions in all four of its four operating segments, so I guess we’ll see soon enough.
In the meantime, both stocks are considerably cheaper from a pure dollars perspective than they were earlier this year. In early April, I said that investors able to tolerate risk might consider buying PLUG stock in the low $20s.
If it gets there or falls into the teens, it just might show up on GE’s radar. Funnier things have happened.
While I doubt either company will get an offer from GE, were the industrial conglomerate to pull out its checkbook, Plug Power would likely be the preferred candidate over Fuel Cell Energy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
