- Hydrogen stocks have massive growth potential in the long-run as the demand for green hydrogen grows.
- Linde (LIN): Recent quarterly numbers are proof of how fast the company is growing.
- Plug Power (PLUG): The company has underdelivered in Q1 results, but has the potential to be a great long-term investment.
- Bloom Energy (BE): Reported record first quarter earnings, and is poised to provide further growth.
This year has brought about massive change across many industries. How hydrogen is produced is one such area of focus for many investors. Accordingly, for those looking to take part in this industry, which hasn’t really taken off until the past two years, hydrogen stocks are a place to start perusing.
Thanks to the Inflation Reduction Act, the cost to produce hydrogen fuel cell costs has fallen. Additionally, subsidies for the production of green hydrogen have boosted many hydrogen stocks. I tend to think this investment will continue, and these companies will continue to benefit over time.
That’s because besides the incentives and subsidies, companies also have a direct incentive for cleaning up the millions of tons of hydrogen that is produced every year. Specific production methods are eligible for a tax credit, encouraging green hydrogen production.
Now, it will take some time before hydrogen becomes mainstream. However, these hydrogen stocks are leading the way in terms of growth potential.
At the top of my list of best hydrogen stocks to buy is Linde (NYSE:LIN). It is the world’s largest industrial gas company in terms of market share and revenue. The company has built various technologies to compress and refuel hydrogen. Linda will invest $1.8 billion to supply clean energy to a blue ammonia plant in Texas, and will also build the infrastructure that is required to sequester over 1.7 million metric tonnes of carbon dioxide annually so that the emissions created in the production of the hydrogen supplied to the plant can be offset.
The company has delivered on earnings as well, seeing a 16% rise in operating profits, which hit $2 billion. Linde’s sales remained flat at $8.2 billion, but the company did report a solid $3.42 in earnings per share. This is also the fourth straight quarter where Linde has exceeded the expectations of Wall Street analysts. The company has already signed multiple deals to build clean hydrogen projects in order to meet the European Union’s net-zero emission target by 2050.
Additionally, Linde also raised the top end of its guidance and expects earnings per share to come in at a range of $3.40-$3.50 with an annual growth of 10% to 13%. The management sees potential to invest over $50 billion globally in the next 10 years which includes investments of over $30 billion in the U.S.
LIN stock is a hot trade today, with several analysts raising their guidance. The stock is trading around the $370 level, and is within spitting distance of its 52-week high of $373 very soon. However, it could certainly hit $400 in the next few months.
Plug Power (PLUG)
Many might cringe looking at Plug Power (NASDAQ:PLUG), but hear me out. The company is a pioneer in the hydrogen fuel industry, creating a solid market for hydrogen fuel cell technology, developing 60,000 such fuel cell systems for the e-mobility market over its lifespan. Plug Power has been a hot name for many years in the industry and is the largest hydrogen buyer in the world. The company already has more than 180 hydrogen fueling stations, and it aims to produce 500 tons of green hydrogen a day in North America by 2025 and 100 tons per day in Europe by 2028.
Recently, PLUG stock dropped by 12% after the company announced results. The company underdelivered in 2022, revising its outlook for 2023. Plug reported 49% year over year growth in revenue this past quarter, but revised its 2023 outlook downward to a projected range of $1.2 billion to $1.4 billion. It now expects a gross profit of $50 million and $140 million this year despite reporting a loss of $69 million in the most recent quarter.
Although I doubt that the company will be able to report a profit this year, I am certain that this is a company with a massive growth opportunity in the market today. PLUG stock will not move aggressively, meaning investors will need a lot of patience. The stock is currently trading at $7.85 per share, with its recent drop being a good opportunity for buy and hold investors. If the company’s management team can execute well and deliver a profit in 2023, there will be no looking back for the stock. I believe the market is currently underestimating the long-term potential of Plug Power right now.
Bloom Energy (BE)
Last on this list of hydrogen stocks to buy is Bloom Energy (NYSE:BE). The hydrogen company has invested heavily in its aim to produce hydrogen in a greener fashion. To this end, Bloom has created a Bloom Electrolyzer that can produce clean hydrogen 15% to 45% more efficiently as compared to other products on the market. This technology is aimed to help heavy industries, which is able to be paired with solar energy and wind energy to create green hydrogen.
Bloom is a hidden gem in the hydrogen industry, and one that will generate massive returns in the long term. Currently, BE stock is trading around $13 apiece, far lower than its 52-week high of $31. Over the past week alone, the stock has declined roughly 25% on the company’s reported earnings. That said, there’s certainly things to like about this report.
In the recent quarter, Bloom saw record first quarter revenue, up 37% as compared to the same quarter last year. The company also saw an improvement in its gross profit margin, but operating costs did come in higher than expected. Thus, the company reported a net loss. That said, Bloom’s management team has maintained its outlook for 2023, and it aims to issue $500 million in green convertible notes to handle the operating expenses. The business has yet to prove itself, but is steadily growing.
Investors who want to make the most of green hydrogen should look beyond the losses. Bloom has a product that can fulfill the needs of several industries, providing consistent power supply at the right cost. If management can get a handle on operating expenses, we could see better number in the coming quarters.
This post originally appeared at InvestorPlace.
On the date of publication, Vandita Jadeja 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.