Fuel cell energy stocks have been in the news for a recently announced tax credit low carbon hydrogen by the U.S. government.
The new tax credit is part of the Inflation Reduction Act (IRA) and could become a major needle-mover for the sector. Fuel cells use energy from hydrogen and other clean fuels to generate power efficiently. Most industry experts feel it will play a massive role in achieving zero carbon emissions.
Moreover, as its technologies improve, the sector will rebound emphatically. Research suggests that the worldwide fuel cell industry will grow 23.3% from 2020 to 2028. Having said that, let’s look at the best fuel cell energy stock to buy on the dip.
| FCEL | FuelCell Energy | $4.20 |
| BLDP | Ballard Power Systems | $7.99 |
| CMI | Cummins | $222.50 |
| PLUG | Plug Power | $28.94 |
| BE | Bloom Energy | $26.22 |
| APD | Air Products & Chemicals, Inc. | $262.23 |
| LIN | Linde | $286.25 |
FuelCell Energy (FCEL)
FuelCell Energy (NASDAQ:FCEL) is a leader in manufacturing fuel cell energy platforms for the production of hydrogen and decarbonizing power.
It operates the world’s largest fuel cell energy facility in South Korea and another in the U.S.
The firm is developing a wide range of solutions for maximizing decarbonization. Moreover, it has a differentiated business model primarily based on recurring revenue via licenses, partnerships and power purchase agreements.
FCEK’s operating results have been somewhat choppy, but the company has outperformed expectations in the quarters, and its revenues have grown by double-digit margins.
Additionally, it focuses on industry trends in expanding its total addressable market, which stands at an incredible $2 trillion. Only a fraction of that market could make FCEL by a multi-bagger.
Ballard Power Systems (BLDP)
Ballard Power Systems (NASDAQ:BLDP) is a Canadian fuel cell systems developer that manufactures fuel cell products for use in engineering, heavy-duty vehicles and other niches.
Over the years, it has built its liquidity balance to help stay afloat and execute its plan effectively. It’s been a relatively consistent performer generating 7.3% revenue growth over the past five years. Moreover, with strong industry prospects ahead, it has enough firepower to steer its business to new heights in the future.
Recently, it unveiled its new cutting-edge fuel cell-powered class 2 truck chassis, which is much lighter than previous models.
FCEL posted disappointing second-quarter results, to say the least, but if we look past near-term challenges and focus on the long-term, Ballard could be an interesting bet at current levels.
Cummins (CMI)
Cummins (NYSE:CMI) is one of the most diversified energy companies trading on the stock market. It has its stakes in natural gas, hybrid powertrains, diesel and hydrogen fuel cells.
Cummins is not exactly a hydrogen pure-play, but its aggressive investments in the niche suggest that it could be a major part of its portfolio down the road. Moreover, it boasts an impressive dividend profile, with 16 years of growth and close to a 3% yield.
In 2019, the firm acquired fuel cells products manufacturer, Hydrogenics for $290 million. Consequently, it renamed its Electrified Power segment “New Power” to represent the move toward fuel cell and hydrogen technologies.
Also, it recently partnered with EV firm Daimler (OTCMKTS:DTRUY) to test out its hydrogen fuel cell powertrain for its flagship Freightliner truck line. The company is taking hydrogen seriously, which could contribute significantly to revenues over the next few years.
Plug Power (PLUG)
Hydrogen fuel cell specialist Plug Power (NASDAQ:PLUG) seems like an anomaly in its sector. It’s arguably the most successful business in the sector, with healthy revenue expansion each quarter.
Moreover, the IRA legislation could be a major catalyst in turning a profit in the next couple of years. It believes it could post 30% gross margins by 2024, compared to a negative 21% in the second quarter of 2022.
The end-to-end hydrogen fuel cell solutions provider saw its revenues grow a hefty 21% year-over-year to a whopping $151.3 million.
Over the past several quarters, Plug has been posting similar growth numbers, which has helped solidify its bull case. In its second quarter, its management highlighted a clear path towards hitting $3 billion in annual sales by 2025.
Despite cost pressures, it has done well to weather the storm and continue tapping into what could be a multi-billion-dollar opportunity.
Bloom Energy (BE)
Bloom Energy (NYSE:BE) manufactures solid-oxide fuel cell mechanisms used for clean energy generation in the U.S. and internationally.
Its business has been a solid performer growing its top line by close to 40% in the past five years. With the challenging economic conditions, growth has slowed down, but it remains an excellent bet over the long term. Moreover, it’s perhaps the only firm in its niche consistently generating robust gross margins.
Its revenues for the second quarter came in at an impressive $243.2 million, a considerable improvement from the $228.5 million it recorded in the prior-year period.
After the strong sales beat, its management states that revenues could average between $1.1 billion and $1.15 billion, almost a 16% increase from the mid-point.
By 2031, it expects annualized sales growth to average between 30% and 35%. A major contributor to long-term growth could be its large-scale solid oxide fuel-cell power generation platform which could generate close to 300 kilowatts of power on a typical configuration. Such technologies could prove perfect for niche-based projects.
Air Products & Chemicals, Inc. (APD)
Air Products & Chemicals, Inc. (NYSE:APD) provides specialty and atmospheric gases and related equipment and services.
It operates a massive hydrogen business that distributes liquid and compressed hydrogen gas via its network of global pipelines. APD has been a consistent performer, with a massive free cash flow balance and a growing dividend.
The company recently announced it will be spending another $4 billion transitioning toward clean energy and raising its commitment to $15 billion through 2027.
According to company estimates, these initiatives will likely eliminate over 20 million tons of carbon dioxide per year. The pledge is part of its “Third by ’30” endeavor, aiming to reduce emissions by one-third within the next eight years.
Linde (LIN)
Linde (NYSE:LIN) is one of the leading manufacturers and distributors of industrial atmospheric gases. It’s a secondary hydrogen fuel cell play, which is fast becoming a major player in the niche.
Linde started work last year on its new blue hydrogen production site located on the U.S. Gulf Coast. The site has the potential to produce upwards of 3 billion cubic feet of hydrogen per day from natural gas. The site is likely to be a major contributor to revenues in the future.
The company had also announced its foray into hydrogen-powered vehicles, which could compete effectively with EVs. It has also invested in wind-power facilities to convert water to hydrogen.
On top of that, it recently opened the first hydrogen refueling system for passenger trains in Germany. Hence, multiple investments in the sector laid down the foundation for massive top and bottom-line expansion.
On the date of publication, Muslim Farooque did not have (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