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Hydrogen stocks are catching the attention of investors in a big way. As the western world pivots to green and renewable energy, more research and development are being undertaken. And hydrogen could prove to be a viable alternative to fossil fuels.
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Hydrogen Sector 101: A Brief Primer
Hydrogen can be used to create energy and the only by-product is water. However, hydrogen does not exist in large and easily extractable quantities like natural gas. So, it’s a bit more complicated at the moment to substitute fossil fuels for hydrogen.
But hydrogen can be produced for electrolysis, which consists of splitting hydrogen from water using electricity. Hydrogen can be used in fuel cells to produce electricity. These energy sources can be small enough to power cars, trucks, buses, or naval vessels.
Many companies are studying how to produce hydrogen more efficiently and lower costs. Economies of scale may help bring down the currently high cost of hydrogen production. Estimates in 2020 and 2021 showed an average cost of $4.75/kg of hydrogen.
However, these estimates from the EU Commission, the US Department of Energy, and the IEA also showed they expect these production costs to come down over the next two decades. The overall reduction in production costs could be as high as 64 percent by 2040.
Hydrogen stocks could be a good fit for a diversified stock portfolio. However, to diversify your investments further we recommend investing in alternative assets such as precious metals, real estate, farmland, and hedge funds.
Let’s take a look at 4 of the best hydrogen stocks, their stock profiles, company and sector fundamentals, as well as their performance, and the latest news events. The list is in order of market capitalization.
Air Products and Chemical Inc. (NYSE: APD)
Air Products and Chemicals was founded in 1940 and is headquartered in Allentown Pennsylvania. The company produces various atmospheric gasses such as oxygen, nitrogen, and argon. APD also produces process and specialty gasses which include the following:
- Carbon dioxide
- Carbon monoxide
The firm also manufactures equipment for the production and processing of gasses comprising non-cryogenic generators and separation units for its clients in several industries including:
- Food & Beverage
- Magnetic resonance imaging
- Energy production
APD Stock Fundamental View
Apart from being one of the oldest hydrogen stocks this company has had 3 consecutive years of solid growing profits. The company pays regular dividends and that adds an extra 2.2 percent to the return on holding these hydrogen stocks.
On October 6, 2022, ADP announced its plans to invest around $500 million to build a green hydrogen production facility in New York. The facility will produce 35 metric tons per day of hydrogen. As well as operate distribution and dispensing processes.
The commercial operation of this facility is expected to start in 2026/2027. The plant will create 90 jobs and will be constructed in Massena New York. The operation is part of New York State’s drive to become a clean energy hub.
On November 8, 2022, Air Products received funding from Alberta, Canada, for a net-zero hydrogen energy complex. The funding amounts to approximately CAD 475 million to create a low-carbon intensity hydrogen network.
Air Products has teamed up with Mabanaft (a clean energy company) and on November 17, 2022, announced a joint venture to build a green energy import terminal in Hamburg, Germany. The development of the project is aimed at the import and distribution of green ammonia.
APD Stock Profile
- Market Capitalization: $65 billion
- Earnings Per Share (TTM): $10.08
- Dividend Yield: 2.20%
- Average Daily Volume: 1,030,284 shares
- 52-Week Price Range: $216.24 – $309.29
- Gross Profits: 3 consecutive years of increasing profits
APD Technical View
Air Products is up 596 percent from its low in March 2009, after the 2008 crisis. While YTD this hydrogen stock is down 4.10 percent at the time of writing. This stock has had a very bumpy ride during 2022 with several deep troughs and high peaks.
However, it recently managed to break above its 200-day moving average and the 50-day moving average followed above with the stock price rally. We have seen some good news for this company in recent months.
And their earnings report from November 3, 2022, fueled the recent rally. Analysts’ estimates for earnings were beaten by 4.71 percent, while revenue estimates were beaten by 10.88 percent.
Plug Power Inc. (NASDAQ: PLUG)
Plug Power Inc. was founded in 1997 and is headquartered in Latham New York. The company produces clean hydrogen and zero emissions end-to-end fuel cell solutions. PLUG’s clients are in the following sectors:
- Supply chain
- Logistics operations
- On-road electric vehicles
- Stationary Power market
The company has clients in North America and internationally. Their main focus is building end-to-end green hydron ecosystems which include green hydrogen production, transportation, storage, and energy generation.
Plug Power builds proton exchange membrane (PEM), fuel cell, and fuel cell processing technologies as well as green hydrogen generation, dispensing, and storage infrastructure. The company has five main areas of production:
- GenDrive: A hydrogen-fueled PEM providing power for materials handling electric vehicles.
- GenFuel: A liquid hydrogen fuel delivery, generation, dispensing, and storage system.
- GenCare: An internet of things-based maintenance and service program for GenDrive fuel cells
- GenSure: Backup power for stationary applications.
- ProGen: Fuel cell engines for motive and stationary products.
Plug Fundamental View
PLUG missed its earnings report target on November 8, 2022. Analysts’ estimates for revenue were 24 percent lower than estimates. While Earnings per share was 28 percent off target. More worryingly Net Loss for Q3 2022 was 60 percent higher than Q3 2021.
Plug Power has not made a profit over the most recent years. And CEO Andy Marsh has mentioned he is working to drive down costs while increasing capacity. A strategy that could bring PLUG back into positive numbers.
Another two issues of concern for companies that are still not churning out profits are debt-to-asset ratio and free cash runway. The debt-to-asset ratio tells us how indebted a company is compared to the assets it holds.
From Plug Power’s balance sheet, we can see that the company has a relatively low ratio of 0.22. Basically, 22 cents to the dollar are financed through debt, leaving plenty of room if the company needs to raise more financing.
Secondly, the free cash flow from their records shows that the company has a cash runway that can take PLUG well past one year of operations. One note that stands out in a negative way is top-management compensation.
The CEO has a 1-year salary of $1.45 million and has cashed in over $36 million during his tenure. This salary level is higher than the average US CEO compensation for a company of this size. It also stands out more since PLUG has produced even greater losses over the last few years.
PLUG Stock Profile
- Market Capitalization: $9.5 billion
- Earnings Per Share (TTM): $-0.97
- Dividend Yield: Not Applicable
- Average Daily Volume: 18,966,777 shares
- 52-Week Price Range: $12.70 – $46.50
- Gross Profits: Negative profits last 2 years
PLUG technical View
This company is down 42.9 percent YTD and trading at $16.49 at the time of writing. While from its low in March 2009 this hydrogen stock has managed to maintain a growth of 691 percent. That attractive multiple of growth has not come with a lack of ups and downs.
In March 2020, PLUG reach a recent low of $2.35 and in just 8 months rallied to its all-time high In January 2021, of $75.49. That’s one hell of a ride for anyone catching the way up, but it’s also a scary one on the way down.
Currently, PLUG stock price is below the 200-day moving average and the 50-day moving average followed below also. We doubt the large swings will die down any time soon. It’s a small-cap company with a lot of potential if state legislatures opt for hydrogen-powered green energy.
However, as that is where all its focus lies, as with many hydrogen stocks, the downside risk is also extremely great.
Ballard Power Systems Inc. (NASDAQ: BLDP)
Ballard Power Systems is a Canadian company founded in 1979 and headquartered in Burnaby. The company designs, builds, sells, and develops proton exchange membranes (PEM) fuel cell products. The firm operates in the following power products sectors:
- Heavy-duty transportation – bus, truck, rail, and maritime
- Materials handling
- Backup power units
- Technology solutions
- Intellectual property
- Hydrogen fuel cell powertrain solutions
- Integration system solutions
The company operates around the globe with a specific focus on these countries:
- United States
- United Kingdom
BLDP Fundamental View
BLDP has a strategic alliance with Linamar Corporation to co-develop and commercialize fuel cell powertrains and components for class 1 and 2 vehicles in North America and Europe.
On November 17, 2022, Ballard announced it had landed an order from Solaris for the sale of 25 hydrogen fuel cell engines to power buses in Poland. In the announcement, Ballard’s chief commercial officer stated that they were seeing increased demand from Europe for hydrogen fuel cell buses.
Ballard issued its earnings report for Q3 2022 on November 9, and revenue was slightly lower than expected. In fact, it’s down 15 percent compared to Q3 2021, and net losses increased by 39 percent over Q3 2021. While earnings per share exceeded analysts’ estimates by 1.5 percent.
BLDP Stock Profile
- Market Capitalization: $1.85 billion
- Earnings Per Share (TTM): $-0.46
- Dividend Yield: Not Applicable
- Average Daily Volume: 3,381,584
- 52-Week Price Range: $5.12 – $17.06
- Gross Profits: 3 consecutive years of dec decreasing profits
BLDP Technical View
At the time of writing, Ballard was down 47.90 percent YTD. Currently trading just over $6, this stock hit an all-time high of $144.94 in March 2000. More recently it reached a high in February 2021, of $42.28. That rally came after touching an all-time low of $0.57 in December 2012.
From the chart below we can see how the stock price has attempted to reach the 200-day moving average, without even getting close. The stock price is currently hovering around its 50-day moving average, but we still see a clear bear market for BLDP from a technical viewpoint.
FuelCell Energy Inc. (NASDAQ: FCEL)
FuelCell Energy was founded in 1969 and is headquartered in Danbury, Connecticut. The firm manufactures, sells, designs, installs, and operates stationary fuel cell power plants for distributed baseload power generation. The company operates mainly in the United States, South Korea, the United Kingdom, Germany, and Switzerland.
The company offers various power generation solutions and recycling applications:
- SureSource: Power generation applications with various outputs – 250, 400, 1,200, 1,400, 2,800, and 3,700 kW
- SureSource Hydrogen: A platform designed to produce up to 1,200 kilograms of hydrogen for multi-megawatt utility, microgrid, and distributed hydrogen applications.
- SureSource Capture: An application for the capture and separation of flue gasses from natural gas, biomass, or coal-fired power plants.
- On-site heat and chilling appliances
FuelCell also operates various products providing services such as:
- Engineering, procurement, and construction
- Real-time monitoring and remote operation
- Online support systems
- Preventative maintenance
- Parts and supplies
- On-site and classroom training
- Power plant refurbishment and recycling services
- Data centers and communication
- Wastewater treatment
FCEL Fundamental View
On Jul 6, 2022, FuelCell announced a partnership with TuNur, a green hydrogen producer based in Tunisia. TuNur will increase the production of clean fuels in Europe and North Africa. The partnership will create an opportunity for FuelCell to expand exports to Europe and North Africa.
FCEL Stock Profile
- Market Capitalization: $1.5 billion
- Earnings Per Share (TTM): $-0.308
- Dividend Yield: Not Applicable
- Average Daily Volume: 10,762,488
- 52-Week Price Range: $2.77 – $10.21
- Gross Profits: 2 consecutive years of negative profits
FCEL Technical View
After hitting a high of $7.33 for 2022 the stock is down 32.39 percent YTD and trading at $3.57 at the time of writing. However, over the past 3 years, FCEL’s share price has grown from $0.25 in November 2019, that’s an increase of 1,328 percent.
But this company’s share price also hit a recent high at $29.44 in February 2021, so it is down 87.6 percent. It’s also true that small-cap share prices often experience wild swings as investors bet on improving market and company growth.
Currently, FCEL’s share price is above the 50-day moving average, but still below the 200-day moving average. The ongoing bear trend that started in March 2022 seems still well entrenched for the time being.
Hydrogen Stocks Conclusion
Hydrogen is the main component that these hydrogen companies use to run a profitable business. Their success will depend greatly on increased demand for hydrogen-based energy generation. For that to happen the general viewpoint from lawmakers should be one of investing in hydrogen power, a bit like they have for solar and wind power.
Some analysts see hydrogen as a feasible substitute for natural gas. And the International Energy Agency has stated that hydrogen is a “versatile energy carrier”. This organization’s support is important for the future of hydrogen-based energy. So, it’s important to know that they are backing this gas as a viable means to produce green energy.
In an interview with CNBC, Goldman Sach’s Michele Della Vigna stated that he and his team believed that hydrogen generation could become a $1 trillion a year market. That’s a considerable increase from current estimates of $125 billion.
Given the current political environment to reach net zero at least, note net-zero is not the same as zero emissions. It seems likely that the demand for hydrogen generation and hydrogen-based power solutions will increase.
Having said that, hydrogen stocks have all the intrinsic risks that any corporation may carry. Creating and running a profitable business will always carry risk. And each hydrogen stock should be valued for its intrinsic value and not just for the overall trend of the wider industry.
If you want to add hydrogen stocks to your investment portfolio, you may want to take advantage of a self-directed IRA. These retirement plans allow you to hold a variety of assets in a tax-enhanced environment. We have created a list of the top self-directed IRA companies, you can read their reviews here.