We recently compiled the 10 Best Hydrogen and Fuel Cell Stocks to Buy. In this article, we are going to take a look at BP p.l.c. (NYSE:BP) against the other hydrogen and fuel stocks.
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.
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).
BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 40
BP p.l.c. (NYSE:BP) is a global energy company, founded in 1908, with its headquarters in London, U.K. It’s a company engaged in the production of natural gas, while also focusing on wind power, hydrogen, and carbon capture. Along with this, the company also produces oil and is engaged in EV charging, retail fuel, and lubricants, which its subsidiary Castrol takes responsibility for.
BP p.l.c. (NYSE:BP) is engaged in several hydrogen initiatives across the globe. Major developments took place related to the company’s proposed blue hydrogen facility in Teesside, H2Teesside. In February 2024, the company announced that it would be teaming with BASF, an international chemical company, whose gas-treating technology BP would be using for capturing carbon dioxide that would be produced during the process of hydrogen production. This is a crucial development given that the project has its commercial operations planned in 2028. Moreover, this project is high in stakes as it would expectedly produce 1.2GW of hydrogen by 2030, fulfilling 10% of the UK’s hydrogen target of 10GW by the same time.
Additionally, it was reported on 16th July 2024 that the company has gotten the green signal from the Federal Ministry for Economic Affairs and Climate Action (BMWK) and the Lower-Saxony Government in relation to funding required by the company for its 100-megawatt (MW) green hydrogen project in Germany. The hydrogen that would be produced has the potential to bag industrial clients for the company in the future, especially steel and chemical companies.
The share price of the company has taken a dip in the past year, in line with the falling oil and gas prices. While natural gas prices have fallen 2.7% in the past year, WTI Crude oil has fallen 1.7%, and understandably, the commodities’ prices have their say in the share price of the stock.
Lower oil and gas realizations, outage in the Whiting refinery, and lower fuel margins led the company’s replacement cost (RC) profits to decrease by $0.3 billion in the first quarter of 2024 to $2.7 billion. Nevertheless, the overall profit of the company rose sharply from $0.4 billion in Q4 2023 to $2.3 billion, thanks to inventory holding gains and increased production of oil despite lower realizations. Despite that the company’s cash flow just hung over the $5 billion mark, which is the lowest level of cash flow since Q4 2020, the company showed its commitment to shareholders’ returns by deciding on a $1.75 billion share buyback plan and announcing a dividend of 7.27 cents per ordinary share.
Despite the cyclical nature of the industry the company is in, and despite the up and down of the stock in the past year, the analysts believe in the developments the company is making in the field of alternative energy solutions industry, especially the hydrogen market, which is the apparent future of energy sector. The analysts have set the target price of the stock at $42.36, which is an upside of 21% from its current price of $34.92. Moreover, 40 hedge fund investors hold interest in the stock, worth $2 billion, helping the stock take a spot in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Overall BP ranks 7th on our list of the best hydrogen and fuel cell stocks to buy. You can visit 10 Best Hydrogen and Fuel Cell Stocks to Buy to see the other hydrogen and fuel cell stocks that are on hedge funds’ radar. While we acknowledge the potential of BP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BP that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
