We recently compiled the 10 Best Hydrogen and Fuel Cell Stocks to Buy. In this article, we are going to take a look at Shell plc (NYSE:SHEL) 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).
A gas refinery lit up against the night sky, showing the scale of the company’s petrochemical operations.
Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 50
Shell plc (NYSE:SHEL), headquartered in London, U.K., is a global energy and petrochemical company. Within its Renewables and Energy Solutions segment, the company produces and sells hydrogen as a part of its mix of energy production offerings, alongside its focus on wind, solar, and electric vehicle charging services.
By Q1 2024, the company’s CrossWind project, which is an offshore wind project in the Netherlands, and Madison Fields project, which is a solar energy project in the U.S., reached their commercial operation, taking the company’s renewable power generation capacity to operation from 2.5GW in Q4 2023 to 3.2GW in Q1 2024. On an overall basis, the company’s adjusted earnings increased by approximately 6% from $7.3 billion in the previous quarter to $7.7 billion, while the EBITDA increased by 14.6% to $18.7 billion! This occurred on the back of a $1.6 billion increase in adjusted earnings in the company’s Chemicals & Products segment, which saw an increase in both the refinery processing intake and chemical sales volume.
However, the company’s revenue in the quarter fell by 17% on a YoY basis to $72.5 billion, amidst fluctuations in the oil prices, which leaves doubts on the minds of investors; however, what’s relieving is that the company still managed to maintain a healthy cash position as its operating cash flows amounted to $13.3 billion in the quarter, and shareholders’ returns amounted to $5 billion through dividends and share repurchases.
Shell plc (NYSE:SHEL), in addition to its petrochemical operations, is making strides in the alternative energy sources market, specifically in the hydrogen market. In March 2024, the company announced two hydrogen initiatives. The first initiative is the Holland Hydrogen 1 (HH1) project in the Port of Rotterdam, Netherlands, which the company will be initiating with Worley, an engineering consultancy company.
The project is about a 200 MW electrolyzer, getting the power from an offshore wind farm, and will in return, produce about 60,000 kg of hydrogen per day, which will help supply power to over 2,300 trucks and also help decarbonize Shell’s Energy & Chemicals Park in Rotterdam. The second initiative involves Shell partnering with Bloom Energy in pursuit of exploring decarbonization solutions, by making use of Bloom’s hydrogen electrolyzer technology. By working together, both aim to create large-scale solid oxide electrolyzer (SOEC) systems, which will be responsible for the production of hydrogen that will be utilized across Shell’s operations. Thus, these initiatives are footprints of Shell’s commitment to leaping in the hydrogen market that is expected to see a demand boom in the coming time.
Thus, with the company’s goal to decarbonize fully by 2050, along with the relevant initiatives taken by the company in the field of renewables, and with the company expecting a 50% surge in its LNG business demand by 2040, accompanied by robust operational performance despite fluctuating commodities prices, the stock is receiving optimistic response from the investors, as evident from the fact that the stock has risen approximately 14% in the past year, with further growth expected as the analysts have set the target price at $86 from its current price of $71.3, translating to an upside of a cool 20.6%. As such, four hedge fund holders have recently taken up a stake in the stock, taking the total tally to 40, worth $5.5 billion, leading the stock all the way to our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Overall SHEL ranks 5th 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 SHEL 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 SHEL 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.