In this article, we will shed light on the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Global Warming Driving the Hydrogen Market
As of 2024, climate change has become an increasingly significant issue globally, as June in 2024 was the warmest month in the 175 year old history of NOAA National Centers for Environmental Information’s data record. Since carbon emissions is one of the driving factors for such a massive global impact, hydrogen, one of the biggest green & clean energy sources, is expected to see an upward trajectory in its market growth in the coming years. As such, its production and consumption are on the rise.
Therefore, the global hydrogen generation market, which stood at the $148 billion mark in 2023, is on its way to hitting $259 billion by 2033, growing at CAGR of 5.75%. Furthermore, BloombergNEF expects the hydrogen supply to grow thirty-fold to 16.4 million metric tons per year by 2030; however, they expect 30% of this planned supply to be achieved by 2030 mainly because of longer project timelines and unstable policy support. This supply is driven by the demand coming from electrolysis, which makes up most of the demand; also, blue hydrogen is pushing up the demand for hydrogen.
In terms of the countries’ share of this global supply, the U.S. is expected to account for 36% of this forecasted supply by 2030, thanks to the fact that most mature projects exist in the country, along with favorable tax policies. Moreover, China, Europe, and the U.S. would all together account for most of this supply by 2030 – 80% of the global supply to be exact. Moreover, the U.S also delivers over half of the world’s fuel cell vehicles, and is responsible for the production of 25,000 fuel cell material handling vehicles, over 8,000 small-scale fuel systems in the country, and over 550 MW of large-scale fuel cell power under planning or already installed, according to The Fuel Cell and Hydrogen Energy Association (FCHEA).
China Leading the Game of Hydrogen
On the other hand, China is leading in the game of electrolysis projects, meant for the production of hydrogen, as it owns 40% of these projects that have reached their Final Investment Decision (FID) globally. Kuqa electrolyzer in Xinjiang, which reached its completion in late June 2024, is the largest electrolysis project in the world, with a capacity to produce 200,000 tons of hydrogen per annum, on the back of the 250-megawatt electrolyzer powered by solar energy.
Germany Coming into the Play
Whereas, on the European front, Germany is leaping forward in the electrolysis market, as its government was seen to be confirming funding of two large hydrogen projects, worth $674 million. Similarly, The U.S. Department of Energy announced in March 2024 its plans to invest $750 million in the hydrogen projects, to bring down costs of clean hydrogen and up the advanced electrolysis technologies.
Therefore, with this analysis of the hydrogen market in the bag, it’s quite necessary to conduct an analysis of the best hydrogen and fuel cell stocks to buy right now, so that we can capitalize on this market growth in the coming time. Thus, let’s jump to our list of the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
A generator being fueled and readied for use as part of an end-to-end green hydrogen ecosystem.
Methodology
To curate our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy, we gathered a list of all companies with a significant presence in the hydrogen and fuel cell industry. We then further narrowed down on the basis of their upside potential and ranked the finest remaining companies by their number of hedge fund holders as of Q1, 2024, using Insider Monkey’s database that tracks the activity of 920 hedge funds. For stocks with equal number of hedge fund holders, we used their upside as the tiebreaker. With this let’s now jump to our list of the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 19
Bloom Energy Corporation (NYSE:BE) is based in California in the U.S. and is engaged in the making of solid oxide fuel cells; although they function much like batteries, last longer than them. These cells can rely on several fuels like natural gas, biogas, or hydrogen. These cells are then packaged in big containers which are then placed at the industrial or commercial site.
Bloom Energy Corporation (NYSE:BE) registered a massive loss in 2023 wherein it recorded an operating loss of $209 million, translating to a loss of $1.42 per share, including the non-operating expenses. The company has been experiencing losses continuously on an annual basis due to the fact that it’s in the early stages of commercialization and is looking for investors, amidst the constantly evolving energy market and extended sales cycles.
Analysts now predict that the company will break even soon and become profitable in 2025, with an expected profit of $26 million. To achieve this, the company would need to grow by 78% year-over-year. Whether it can achieve the breakeven soon or not, it’s a question that the investors must be wary of. While the growth trajectory required to breakeven is high, the company isn’t stopping making big leaps either.
It was announced by the company in April 2024 that it will be powering Quanta Computer’s operations through its fuel cell technology that will allow it to keep giving out the power to Quanta 24/7 365 days a year!
In July 2024, the company entered into a deal with CoreWeave, which is an AI company backed by Nvidia. According to the deal, Bloom Energy Corporation will be powering CoreWeave’s data center in Illinois. With the power demand set to grow from AI, and with this big deal in the bag already, Bloom Energy Corporation is anticipating a massive uptick waiting in the corner for them. Moreover, as a result of this deal, the stock surged 1.3% on the 17th of July.
Amidst these and many other developments, on May 22, the company also proposed a green convertible senior note offering, proceeds of which it intends to use to partially fund its R&D works, and sales & marketing activities, and capital expenditure.
With companies and authorities demanding cleaner low-carbon power solutions, and with AI-driven growth in data centers driving the demand for such power solutions even more, Bloom Energy’s management is expecting these shifts to work in favor of the company’s cheap low-carbon fuel cell technology. As such, analysts are seeing the company’s EPS increasing from negative $1.42 in 2023 to positive $0.11 in 2024, while they are expecting it to increase further, reaching $0.5 in 2025 on the back of a revenue increase of 24% in 2025.
Furthermore, the stock has grown around 9.4% in the past month as the analysts are giving out the buy rating of the stock. Moreover, 19 hedge fund holders have their stakes in the stock, totaling $84.6 million. Some big institutional investors are also keeping an interest in the stock, including Morgan Stanley, Vanguard, Blackrock, also justifying the stock’s place in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Following is what the ex-CFO of the company spoke about the company’s profitability as of Q1 2024:
“I would expect an improvement in product margins as acceptances in the United States, the rest of our international business increase throughout the year. An area that improved our margins in the first quarter was our service business. As we continue to grow our revenues, reduce performance payments, and reduce our replacement power module costs. I would expect this trend to continue throughout the year, and we expect our service business to be profitable on a non-GAAP gross margin basis this year.”
9. Hyster-Yale, Inc. (NYSE:HY)
Number of Hedge Fund Holders: 20
Hyster-Yale, Inc. (NYSE:HY) is an American integrated company based in Ohio and specializes in designing lift trucks and materials handling solutions and services these through a robust network of independent dealers. To enhance their materials handling solutions and to provide an alternative source of energy for their lift trucks, they have in place their hydrogen fuel cell power products (fuel cell stacks and engines) which their subsidiary, Nuvera Fuel Cells, LLC makes.
Earlier this year, in January, Hyster-Yale, Inc. (NYSE:HY) announced that PortxGroup, a logistics handling company, will act as the distributor of the company’s products in key Asian sub-regions of Thailand, Malaysia, Indonesia, and South Korea, which would bolster the company’s business of materials handling in these regions’ seaports and terminals.
The company recorded an outstanding performance in Q1 2024, wherein, it recorded a revenue of $1.1 billion up by almost 10% to Q1 2023; this is the fourth consecutive quarter that the quarterly revenue has been over the $1 billion mark. Not only did their operating margin increase from 4.3% in Q1 2023 to 7.9% in Q1 2024 (the highest margin ever recorded), but their earnings per share also increased by almost 90% to $2.93 per share! This performance came out on the back of higher average sales prices and an optimal sales mix which resulted in improved margins; average lift truck sales price increase by 17% on a YoY basis.
The company has had an outstanding year in 2023, wherein its Q4 2023 operating profit was up by 146% from Q4 2022, reaching $48.7 million. The full-year net income was up by $200 million, while the revenue was up by 16%.
This continued operational excellence – on the back of product price increases, efficient product mix shifts, and improved product margins – has also led to a surge in the stock, which has increased 58% in the past year, and increased by 20.3% on a year-to-date basis!
Moreover, in May 2024, the company announced a new dealership with LiftOne – which runs a dealership of full-service materials handling and warehouse solutions. LiftOne would cover the regions of North Carolina, South Carolina, Alabama, Georgia, Tennessee, and Virginia in the U.S. for the servicing of the company’s products. This coverage would become effective from the 1st of June 2024. This showcases the company’s commitment to continuous expansion of its coverage to grow continuously.
The stock is priced fairly cheaply currently, and as the analysts are seeing the stock’s intrinsic value sitting somewhere around $96, the stock is carrying an upside of a cool 28%. While this forecast is on the upside, the average price target set by the analysts is also close – sitting at a stock price of $88.5 and carrying an upside of 18.7%. However, the stock carries high risk, as per analysts, which is also evident through the stock’s beta of 1.3; what this means is that the analysts, despite their forecasts, eye a negative earning growth of -5.6% on the downside, which anyone who’s investing in the stock should be wary of.
On the back of strong performance in the first quarter of 2023, and the expansion plans it’s carrying out, the analysts expect the company’s EPS to grow at 18.65% this year. As a result of this, 20 hedge fund holders have kept interest in the stock, worth $100.6 million. GAMCO Investors and AQR Capital Management have the largest holdings in the stock, worth $63 million and $4.9 million, respectively. Hence, the stock is well deservedly placed in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.