Hydrogen has become the latest buzzword in the world of clean energy investing, with hydrogen stocks beginning to gain traction among investors. Several factors have thrust low carbon hydrogen – produced without fossil fuels, or by storing and capturing the emissions – into the spotlight, including the 2015 Paris climate agreement, US president Joe Biden’s huge climate investment, and the EU’s three-stage clean hydrogen strategy.
The FT reports that industry lobby group the Hydrogen Council expects $300bn to be invested by public and private sectors globally over the next decade. However, most hydrogen is still produced from harmful fossil fuels such as natural gas and coal. Clean hydrogen, produced with renewable energy, only accounts for approximately 1% of global hydrogen supply, according to the FT.
The iShares Global Clean Energy ETF [ICLN] is down 8.50% over the last week, as of 4 May’s close.
Fall of the iShares Global Clean Energy ETF over the past week
We take a look at five hydrogen-focused stocks, four of which are among 84 constituents in ICLN: Plug Power [PLUG], FuelCell Energy [FCEL], Bloom Energy [BE] and Ballard Power Systems [BLDP], plus ITM Power [ITM].
US hydrogen fuel cell systems provider Plug Power’s share price has risen circa 490% over the past 12 months to 4 May’s close of $24.60, though the stock has slipped 67.41% from the 52-week high of $75.49 achieved on 26 January. PLUG revealed a 42.5% year-on-year rise to a record $337m in gross billings in 2020 on 25 February, and said it’s “on track to deliver on recently-raised 2021 and 2024 financial targets”. It also ended the year with “$5bn in cash to execute on its global growth strategy.”
Plug Power’s share price rise over the past 12 months
The company, which has a current market cap of $13.4bn, has already formed a number of strategic partnerships, including last week’s deal with BAE Systems [BA], plus acquisitions of United Hydrogen and Giner ELX, which help to make Plug Power “a fully vertically green hydrogen generation company”, as reported by entrepreneur.com. Looking ahead, PLUG plans further investment to “deliver on [the] substantial growth opportunity in [the] green hydrogen economy.”
The consensus price target among analysts covering PLUG’s share price is $55.74, which is 126.6% above 4 May’s close. PLUG has 11 buy, one overweight, six hold and one sell rating, for a consensus overweight rating, according to the Wall Street Journal.
FuelCell Energy, which designs and operates power generation plants using an electrochemical process, saw its share price rise 330.35% over the last 12 months, closing 4 May at $8.65. Like PLUG, however, the shares have fallen back from a February high of $29.44.
While the prospect of massive US government spending on green technology helped fuel gains made from November through to mid-February, the company’s earnings have deteriorated, with Q1 revenue down 9% year-on-year for a loss of $3.6m. Looking ahead, Q2 EPS is expected to improve to -$0.05, which would be a year-on-year improvement of 28.57%. With seven hold and three underweight ratings, FuelCell’s share price has a consensus underweight rating. Despite that, analysts’ average price target of $11.59 represents a 34% increase from 4 May’s close.
Bloom Energy manufactures electrolysers, which make hydrogen for fuel cells. It aims to redefine the electric power market through its on-site electric power solution. Bloom Energy’s share price is up 215.40% over the last year, and like its peers, has come off a February high. Bloom is a member of Hydrogen Forward, a “coalition of (11) companies and organisations across the hydrogen value chain that are working to ensure hydrogen is a key contributing solution in the energy transition.” Other members include Anglo American [AAL], Royal Dutch Shell [RDSA] and Toyota [TYT].
Bloom Energy’s share price rise over the past year
With four buy, two overweight, five hold and one underweight rating, analysts rate Bloom a consensus overweight. Analysts’ average price target of $35.50, which represents a 53.35% hike on 4 May’s close at $23.15, bears out this optimism.
Ballard Power Systems
Ballard develops and manufactures proton exchange membrane fuel cells. It makes zero-emission fuel-cell solutions for marine vessels and last month announced a deal to supply fuel cell modules to Sierra Northern Railway in California, to power a zero-emission switching locomotive. Ballard’s share price has risen 61.63% in the last 12 months, but is 61.5% off its 52-week February high (as of 4 May’s close). BLDP has a consensus overweight rating, with nine buy, three overweight and six hold ratings. An average price target of $31.88 represents a 96% rise from 4 May’s close at $16.26.
British hydrogen manufacturer ITM Power’s share price “illustrates the frenzy around hydrogen” according to the FT. The shares have moved from just 26.89p at the start of 2019 to 518p at 30 April’s close, a phenomenal 1826.37% gain. Over the last year, ITM’s share price is up an impressive 220%. Referring to the UK’s 2019 climate announcement, ITM CEO Graham Cooley said “the UK government’s legislation for net-zero [emissions] by 2050 changed the world.”
“I would call this the decade of hydrogen. But a lot of it depends on what we get right in the next five years and then scale up over the following five years” - Paul Bogers, Shell’s vice-president of hydrogen
One of the units being manufactured at ITM’s factory is destined for Shell’s Rhineland refinery in Germany, where the oil and gas giant is installing the world’s largest hydrogen electrolyser, capable of producing around 1,300 tonnes of hydrogen a year, reports the FT. With 10 buy ratings and one hold with the WSJ, analysts rate ITM a consensus buy, and with an average price target of 600.00p according to MarketBeat, ITM’s share price has a potential upside of 15.27% from 30 April’s close.
The hydrogen economy has a long way to travel, but there’s no doubt change is happening. “I would call this the decade of hydrogen,” Paul Bogers, Shell’s vice-president of hydrogen, told the FT. “But a lot of it depends on what we get right in the next five years and then scale up over the following five years.”