There is no doubt that the hydrogen economy is going to play a major role in the global push towards clean energy. However, hydrogen stocks have not been top performers in the last few quarters. That’s understandable as markets go through down cycles and it’s applicable even for specific sectors. I believe that the correction in hydrogen stocks is a good opportunity to accumulate for the next few years.
Some of the best hydrogen stocks are poised to deliver multi-bagger returns due to stellar revenue growth. To put things into perspective, global “spend on producing hydrogen for energy purposes from now until 2050 will be USD 6.8tn, with an additional USD 180bn spent on hydrogen pipelines.” The growth story will span over several decades. The revenue for some of the best hydrogen companies is the tip of the iceberg.
Let’s explore three hydrogen stocks that look attractive for long-term exposure.
Plug Power (PLUG)
Plug Power (NASDAQ:PLUG) stock has plunged by 61% in the last 12 months. I believe that PLUG stock is attractively valued considering the Company’s long-term growth outlook. It’s worth noting that the short interest in the stock remains high at 23%. I would not be surprised with a big short squeeze rally from current levels of $6.6.
Coming to the financial roadmap, Plug Power has ambitious targets. For the current year, the Company expects revenue of $1.2 billion. The guidance is for revenue of $6 billion and $20 billion in 2027 and 2030 respectively. Further, Plug Power expects a gross margin of 35% by 2030.
While the targets are steep, industry tailwinds are positive. It’s a risk worth taking and multibagger returns seem likely. In August, the Company showcased the world’s first 15TPD green hydrogen plant. Business progress has been in the right direction and I don’t see financing growth as a concern.
Air Products and Chemicals (APD)
Air Products and Chemicals (NYSE:APD) has remained mostly sideways year-to-date. The 2.47% dividend yield stock looks attractive at a forward price-earnings ratio of 24.4. With aggressive investments planned towards building the hydrogen economy, Air Product is likely to be a value creator.
Air Products and AES have agreed to build the largest green hydrogen facility in North Texas. With an investment of $4 billion, the facility will have a capacity of 200mt/day. The Company will also be constructing a 1.2 million tonne per year green hydrogen facility in Saudi Arabia, which will be the largest in the world. Additionally, the Company is investing in a blue hydrogen hub in Western Canada.
The key point to note is that Air Products has high financial flexibility and I expect continued investments. This sets the stage for healthy revenue growth and cash flow upside in the next five years.
Bloom Energy (BE)
Bloom Energy (NYSE:BE) stock has remained depressed for year-to-date. It’s among the hydrogen stocks that are worth accumulating. As an overview, Bloom Energy has a solid oxide platform for distributed generation of electricity and hydrogen.
The Company’s Solid Oxide Fuel Cells have already been deployed in applications across healthcare, data centers, critical manufacturing, and retailers. The solid oxide platform already has more than 700 installations globally. With a big addressable market, the growth outlook is positive.
For Q2 2023, Bloom Energy reported revenue growth of 23.8% on a year-on-year basis to $301.1 million. However, Bloom Energy reported an operating loss of $54.5 million for the quarter. The positive is that the Company has guided for a positive non-GAAP operating margin for 2023. With operating leverage, I expect sustained margin expansion.
As of Q2 2023, Bloom reported cash and equivalents of $900 million. This provides the Company with high financial flexibility to invest in deepening the product pipeline. Some of the recent launches include Series 10 and an enhanced CHP solution for net zero heating and cooling.
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.
