Harnessing Hydrogen: 3 Companies Leading the Way


  • The overdone retreat of hydrogen stocks in reaction to leaked information from the Biden administration has created a buying opportunity. 
  • Plug Power (PLUG): Worries about the company’s ability to stay in business are not justified.
  • Linde (LIN): The firm looks poised to get a big boost from new hydrogen plants.
  • Air Products and Chemicals (APD): As a huge producer of hydrogen, APD is poised for a big boost.
hydrogen stocks - Harnessing Hydrogen: 3 Companies Leading the Way

Source: Shutterstock

In recent days, many top hydrogen stocks have tumbled due to the leak of the conditions that the Biden administration is thinking of forcing firms to meet in order to receive the hydrogen tax credit. According to the leaked draft from the Treasury Department, for hydrogen producers to qualify for the credit, they would have to create their fuel using renewable energy projects launched within the previous three years, Bloomberg reported.

One source was quite fatalistic about the criteria. “If true, the Biden Administration’s proposed strategy for implementing these provisions will fail to get this new industry off the ground,” Jason Grumet, the CEO of the American Clean Power Association, stated. But, in my view, the rules will make life more difficult but not impossible for hydrogen producers. After all, many large renewable energy projects are being built every day in the U.S., and hydrogen producers can use wires and cables to tap into them. Given these points, I believe the recent sharp declines of the top hydrogen stocks are overdone. Here are three great names to buy on weakness.

Plug Power (PLUG)

Person holding smartphone with logo of US hydrogen fuel cell company Plug Power Inc. (PLUG) on screen in front of website. Focus on phone display. Unmodified photo.
Source: T. Schneider / Shutterstock.com

Even before hydrogen stocks’ recent retreat on worries about whether hydrogen producers will be able to obtain tax credits, Plug Power (NASDAQ:PLUG) stock had retreated tremendously.

That’s because the company reported weaker-than-expected third-quarter results and had warned that it may not be able to stay in business “without having to liquidate a portion of its assets and/or restructure its obligations,” Barron’s reported, citing an accounting expert.

But Plug’s Q3 miss was largely caused by hydrogen shortages in North America that should soon ease. What’s more, PLUG CEO Andy Marsh called the warning an “accounting technicality,” explaining that the company has many methods of raising the funds it needs to stay in business and keep making progress toward becoming a green hydrogen superpower.

Further, as I’ve noted in past columns, PLUG has many upcoming positive catalysts. Among these catalysts are the imminent launch of multiple green hydrogen plants that will greatly lower its costs and deals to start supplying Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) with large amounts of the fuel in 2025.

Linde (LIN)

Logo of Linde AG (LIN) in Hanover, Germany - The Linde Group is a multinational chemical company
Source: nitpicker / Shutterstock.com

Linde’s (NASDAQ:LIN) hydrogen business is rapidly expanding, as the company reported on Dec. 5 that it had raised the production capacity of its liquid hydrogen plant in Alabama to “up to 30 tons per day.”

LIN indicated it will be able to easily sell all of the liquid hydrogen the plant produces, stating that “the plant will meet increasing demand for hydrogen from Linde’s existing and new customers.”

And in January, the company reported it would increase the production capacity of its green hydrogen plant in California to meet the growing demand for the fuel for transportation purposes.

LIN, which is already solidly profitable, looks poised to get a big boost from demand for the new hydrogen supplies it’s bringing online.

Air Products and Chemicals (APD)

Air Products (APD) logo on the Arts Quest building, Air Products is a sponsor of Air Products Town Square at Arts Quest in Bethlehem, PA
Source: Andy Borysowski / Shutterstock.com

Another very profitable company poised to get a big boost from the hydrogen boom is Air Products and Chemicals (NYSE:APD). Calling itself “the world’s leading hydrogen supplier,” APD noted it “owns and operates over 100 hydrogen plants producing more than seven million kilograms (three billion standard cubic feet) per day of hydrogen.”

The company is planning to build a huge $7 billion hydrogen plant in Louisiana and another such plant in the Netherlands. Both facilities will use natural gas to create hydrogen fuel, but both facilities will also use carbon capture technologies to limit their carbon footprints.

APD stock has a rather attractive forward price-earnings ratio of 20, and analysts, on average, expect its earnings per share to jump to $14.20 next year, up from $11.51 in 2022.

On the date of publication, Larry Ramer held a long position in PLUG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

Article printed from InvestorPlace Media, https://investorplace.com/2023/12/harnessing-hydrogen-3-companies-leading-the-way/.

©2024 InvestorPlace Media, LLC