Globally, there seems to be consensus on the point that countries need to achieve net zero emissions by 2050. This is critical from the perspective of slowing down global warming and tackling its consequences. Among the various plans, big investments in the hydrogen economy can support the decarbonization objective. Therefore, it goes without saying that hydrogen stocks are attractive not just for the next few years but a few decades.
Some big and emerging companies have committed to invest significantly in boosting the global hydrogen economy. This column focuses on three hydrogen stocks to buy now for long-term value creation. These stocks represent companies committed to making some big investments in boosting green hydrogen production.
In terms of the market potential, “nearly all hydrogen consumed today is grey hydrogen (approximately 90 million tons per annum).” However, by 2050, it’s expected that total hydrogen demand will be in the range of 125 to 585 Mtpa. Of this, clean hydrogen will account for 73% to 100% of total demand. Clearly, there is ample headroom for growth and value creation.
Linde (LIN)
Linde (NASDAQ:LIN) is among the blue-chip hydrogen stocks to buy for long-term value creation. Besides the potential for capital gains, LIN stock also offers a dividend yield of 1.27%.
It’s worth noting that Linde already has deep expertise in the hydrogen sector. The company has close to 200 hydrogen refueling stations and 80 hydrogen electrolysis plants globally. Further, the services cover the entire value chain of production, processing, storage and distribution.
In terms of its project pipeline, Linde will be building the largest electrolyzer that will double Linde’s green liquid hydrogen production capacity in the U.S. In Europe, the company is constructing a 24MW proton exchange membrane electrolyzer that can fuel approximately 600 fuel cell buses, driving 40 million kilometers.
Other countries where green hydrogen projects are being pursued include Norway and Brazil. The key point is that as the projects commence production, it will likely positively impact growth and cash flows. With high financial flexibility, I expect Linde will continue to invest in major green hydrogen projects.
Bloom Energy (BE)
Bloom Energy (NYSE:BE) stock has declined by 18% in the last 12 months. I see this as a good accumulation opportunity. While a forward P/E of 130 seems high, there is a strong case for healthy earnings growth in the next few years.
As an overview, Bloom Energy manufactures and sells solid-oxide fuel cell systems. The company’s hydrogen-powered solid-oxide fuel cell technology has applications across industries that include healthcare, data centers, critical manufacturing and retailers. This segment will likely drive growth and I am particularly bullish on collaborations related to data centers.
In March, Bloom Energy signed an agreement with Shell (NYSE:SHEL) to develop replicable, large-scale, solid oxide electrolyzer systems that would produce hydrogen for use at Shell assets. This collaboration with an energy major is likely to boost growth.
For Q1 2024, Bloom reported revenue of $235.3 million, which was lower by 14.5% on a year-on-year basis. However, with “a robust commercial pipeline,” it’s likely that Bloom will be back to a growth trajectory in the coming years. Additionally, the company is focused on product cost reduction, likely to translate into EBITDA margin improvement.
Plug Power (PLUG)
Among penny hydrogen stocks, Plug Power (NASDAQ:PLUG) is a high-risk bet worth considering. In the last 12 months, PLUG stock has plunged by 74%.
However, it’s worth noting that the hydrogen stock touched 52-week lows of $2.21 at the beginning of this month. Currently, the stock is higher by 45% from those levels. With short interest still at 27%, I am expecting a big short-squeeze rally.
On the fundamental and business front, there are significant concerns. However, Plug Power has delivered some positive news in the last few months. That’s likely to be a catalyst for a sharp rally.
In May, Plug Power received a conditional commitment from the U.S. Department of Energy for a $1.66 billion loan. That will be utilized for the “development, construction and ownership of up to six green hydrogen production facilities.”
In June, the hydrogen company announced that it accumulated 7.5GW in global basic engineering and design package contracts since the introduction of the offering two years ago. The swelling backlog provides revenue visibility. In another recent development, Plug Power and Renault have received “approval from the European Commission for the joint acquisition of HyVia to manufacture fuel cell light commercial vehicles.”
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
