In the global push for clean energy, it seems increasingly likely that hydrogen will play a big role. Last year, more than 20 countries agreed to “boost output of low-emission hydrogen to at least 90 million tonnes a year by 2030” from current levels of one million tonnes annually. That is an indicator of the growth potential in the industry through the decade.
Of course, the growth trajectory is likely to remain beyond the next seven years. Fuel Cell and Hydrogen Energy Association President Morry Markowitz believes the “hydrogen industry can meet 14 percent of U.S. energy demand by 2050.”
The International Energy Agency estimated the cost of “producing hydrogen from renewable electricity could fall 30% by 2030.” Declining cost is another catalyst for scaling up hydrogen production.
It goes without saying that it’s a good time to consider exposure to some of the best hydrogen stocks. Considering the industry growth potential, quality hydrogen stocks are poised for multibagger returns.
This column focuses on three of the best hydrogen stocks to buy and hold.
Plug Power (PLUG)
Plug Power (NASDAQ:PLUG) stock skyrocketed during the euphoric rally in the first quarter of 2021. However, the stock has been in a sustained correction mode. After a plunge of 73% in the last 12 months, PLUG stock is worth considering for the long term.
For Q2 2023, Plug Power reported revenue of $260.2 million, a 72% increase year-over-year (YoY). The company also reaffirmed its 2023 revenue guidance of $1.2 to $1.4 billion. At the same time, Plug continued to report significant operating level losses.
But I would look at the larger picture, considering the developments in the hydrogen economy. PLUG has guided revenue of $5 billion in 2026 with a gross margin of 30%. Revenue is expected to top $20 billion by 2030 with a gross margin of 35% and an operating income in excess of 20%.
Therefore, if the execution is right, PLUG stock will be a multibagger from current levels. The company believes it’s at an inflection point of growth. The deep correction seems like a golden accumulation opportunity.
Air Products and Chemicals (APD)
Air Products and Chemicals (NYSE:APD) is among the blue-chip hydrogen stocks to buy and hold. APD stock looks attractive at a forward price-earnings ratio of 26 and offers a dividend yield of 2.34%.
Considering strong fundamentals and high financial flexibility, Air Products should make big investments in the hydrogen economy. As a matter of fact, the company is already pursuing some of the largest hydrogen projects in the world. For example, Air Products teamed with the power utility conglomerate AES (NYSE:AES). The partnership will build a $4 billion green hydrogen production plant in North Texas.
Similarly, the company will invest $4.5 billion to build, own and operate the world’s largest blue hydrogen production facility in Louisiana. Outside the United States, the company is investing in Saudi Arabia to supply 650 tons per day of carbon-free hydrogen for the transportation sector. With several other projects in the pipeline, the company has robust long-term growth visibility.
Bloom Energy (BE)
Bloom Energy (NYSE:BE) is among the best hydrogen stocks to buy and hold. After a correction of 43% in the last 12 months, the stock looks attractive. It’s worth noting that BE has a short interest that’s about 15% of the free float. I would expect a short-squeeze rally on a few positive business developments.
As an overview, Bloom Energy is a producer of solid-oxide hydrogen fuel cells. The company’s fuel cell has already been deployed in hundreds of applications across healthcare, data centers, critical manufacturing and retailers. Therefore, the addressable market is significant.
For Q2 2023, Bloom Energy reported healthy revenue growth of 23.8% YoY to $301.1 million. The company’s gross margin expanded by 1,950 basis points for the comparable period. With strong product shipment, the company expects growth to remain robust, and I believe that BE stock is poised for a strong reversal relatively soon.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
