The hydrogen economy can be a value creator for decades. Choosing the right hydrogen stocks to buy and holding with patience is the key to making millions from the hydrogen investment theme.
It’s worth noting that global hydrogen consumption is already around 90 million tons per annum. However, “nearly all the hydrogen consumed today is grey hydrogen.” This will change in the coming decades, with clean hydrogen replacing grey hydrogen.
A McKinsey report indicates that 2050 clean hydrogen demand could account for up to 73% to 100% of total hydrogen demand. This would imply 125mtpa to 585mtpa of clean hydrogen demand. This would require some big investments and provide ample headroom for growth for some of the biggest hydrogen companies.
In the recent past, hydrogen stocks have been relatively subdued. I believe that it’s a good time to accumulate before some of the best hydrogen stocks fly higher. This column discusses three hydrogen stocks to buy with multibagger returns potential.
Linde (LIN)
Linde (NASDAQ:LIN) is the best hydrogen stock to buy, considering the company’s expertise in the sector. LIN stock has increased by almost 25% in the last six months. However, fresh exposure can be considered at current levels with a long-term investment horizon.
Coming to expertise, Linde has close to 200 hydrogen refueling stations and 80 hydrogen electrolysis plants globally. The company has capabilities across the production, processing, and storage & distribution value chain.
From a financial perspective, Linde expects to deliver annual earnings per share growth of 10%. With a healthy project backlog, the growth target seems achievable.
At the same time, Linde is focused on green hydrogen, blue hydrogen, and carbon capture solutions. These energy transition segments will drive growth in the coming years. The company sees a $50 billion investment pipeline globally in the energy transition business. With strong fundamentals, I don’t see financing aggressive growth in the clean energy business as a concern.
Air Products and Chemicals (APD)
Air Products and Chemicals (NYSE:APD) stock has declined by 16% in the last 12 months. This correction is a good accumulation opportunity with APD stock trading at an attractive forward price-earnings ratio of 19.3. Further, the stock offers a robust dividend yield of 2.97%.
Air Products has made some big commitments towards energy transition projects focusing on hydrogen energy. To put things into perspective, the company has committed investments of $15 billion for the energy transition. Of this, $11 billion in projects will be executed before 2027. This provides growth visibility for the next few years.
In the United States, the company has partnered with AES to build the largest green hydrogen facility in North Texas. It’s also worth noting that the company is looking at global expansion. The company is building Europe’s largest blue hydrogen plant that’s likely to go on-stream in 2026.
Further, an equal production joint venture of ACWA Power, Air Products and NEOM is establishing the world’s largest green-hydrogen-based ammonia production facility in Saudi Arabia. The plant will produce up to 600 tonnes of carbon-free hydrogen per day in green ammonia.
Bloom Energy (BE)
Bloom Energy (NYSE:BE) is another depressed name among hydrogen stocks to buy. After a correction of 36% in the last 12 months, I expect BE stock to trend higher.
Last month, Bloom Energy signed an agreement with Shell (NYSE:SHEL) to investigate opportunities for innovative large-scale renewable hydrogen energy projects. Shell will use Bloom’s proprietary hydrogen electrolyzer technology as part of this partnership. The solid oxide electrolyzer will also produce hydrogen at Shell’s assets.
Notably, most hydrogen production globally (current) is grey hydrogen. Bloom’s solid oxide electrolyzer can replace fossil fuel-powered grey hydrogen supplies. The partnership with Shell, therefore, unlocks ample opportunities for global refineries.
I must add here that the solid-oxide fuel cells have been deployed in applications across healthcare, data centers, critical manufacturing, and retailers. The addressable market is, therefore, significant as industries focus on energy transition.
On the date of publication, Faisal Humayun 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.