All energy comes with a cost. Fossil fuels, the world’s mainstay, have a high pollution footprint and a dangerous environmental impact, while solar and wind power, frequently touted as options in lieu of hydrocarbons, have extremely low energy densities, intermittent energy production, and a high dollar-cost for installation.
This has engineers seeking out alternatives to both, and hydrogen fuel is frequently touted as just such an alternative. Hydrogen solves the problems inherent in fossil fuels, wind, and solar – it is cheap, abundant, and non-polluting, and can be derived from simple water. Its main drawbacks are high reactivity and flammability, and the attendant regulatory requirements.
This hasn’t stopped energy researchers from working on cheaper, faster modes of producing pure hydrogen from clean feedwater. Chemists at USC are working on an ‘on-demand’ technology to generate hydrogen when and where it’s needed, bypassing the need for high-pressure storage and transport logistics. The key point here is removing the high-pressure systems; that will drastically reduce the input costs of hydrogen power systems.
The advantages of and developments in the hydrogen fuel industry are sparking interest on Wall Street. Leading the charge is Samantha Hoh, an analyst at HSBC, who is intrigued by the industry’s potential. Her recent picks include two hydrogen-related stocks that she predicts could gain up to 65% in the upcoming months.
Do other analysts agree with Hoh? We’ve used the TipRanks database to find out. Let’s take a closer look.
Bloom Energy (BE)
First up is Bloom Energy, a hydrogen company focused on clean fuel cell power generation technology. Bloom’s fuel cells, based on solid oxide technology, use chemical reactions to oxidize a fuel, producing a stable flow of electricity. Being based on hydrogen fuel, the oxidation reaction in the fuel cell generates simple water, pure H2O, as its by-product – but the cells are compatible with several other fuels, including natural gas and biogas. The end result is the end-all be-all of clean energy boosters: an energy source that generates power without using combustion, producing only ultra-low or zero carbon dioxide emissions, and whose main ‘exhaust’ element is plain water.
Bloom has developed its fuel cells on a wholly-owned platform it dubs the Energy Saver. The platform is designed to be in an ‘always on’ mode, allowing it to provide clean power on demand, at the customer’s location and schedule. The Energy Saver is also readily scalable, and installations can be tailored to fit the customer’s current needs – but are also amenable to quick expansion. Bloom’s flexible energy generation capabilities offer clear advantages to customers – and in a bit of irony, the company counts the major oilfield services firm Baker Hughes as one of those customers.
Bloom prides itself on building long-term partner relationships with its customer base and has made a point of working with industrial firms to develop the full potential of hydrogen-based fuel cells. One such prominent customer relationship, dating back to 2019, is with Samsung Heavy Industries. Bloom works with the Korean firm to develop large-scale marine shipping vessels running on electric power from on-board fuel cell installations. Bloom is adapting its technology to use liquid hydrogen and polymer electrolytes, a formulation that can meet the needs of ocean-going vessels.
More recently, Bloom announced last month that it had taken the first step in its installation of a 10-megawatt solid oxide fuel cell contract with Taiwan’s Unimicron Technology, a company engaged in the manufacture of printed circuit boards. Bloom delivered the 600-kilowatt Energy Server within 5 months of receiving the order and had it online within 3 weeks of delivery. The announcement highlights both Bloom’s ability to deliver scaled power quickly and its sizable work backlog.
For HSBC analyst Samantha Hoh, Bloom’s ability to grow, through opening new markets domestically and internationally, are key points. She writes of the company, “With significant tailwind from the US Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL), as well as a global race towards a clean hydrogen economy, Bloom is executing on its multi-year growth strategy of (1) international expansion, (2) new market opportunities, and (3) developing new sales channel. A new manufacturing facility is ready to scale for a hydrogen economy driven by energy security, decarbonization, and electrification trends, as well as strong legislative support.”
To this end, Hoh rates BE shares a Buy, unsurprisingly in light of her comments, and sets a $22 price target that suggests a robust 65% one-year upside for the stock. (To watch Hoh’s track record, click here)
Overall, Bloom gets a Moderate Buy rating from the analyst consensus, based on 12 recent analyst reviews with a 7 to 5 breakdown of Buys versus Holds. The shares are trading for $13.37 and their $23.70 average price target is even more bullish than the HSBC view, suggesting a 77% gain in the next 12 months. (See Bloom Energy stock forecast)
Plug Power, Inc. (PLUG)
The second stock we’ll look at is Plug Power, another hydrogen fuel cell specialist. Plug uses ‘green’ hydrogen, that is, hydrogen whose production process itself relies on renewable energy sources, and the company is involved in all stages of the fuel cell process, from developing the technology to deploying power systems for its customers. Plug can also build power storage systems and the infrastructure necessary for bringing fuel cell electrical generation systems online. The company is capable of setting up industrial and utility-grade systems and counts such names as Amazon, Carrefour, and Walmart among its customers.
Plug’s fuel cell systems generate power through electrochemical reactions, like all hydrogen-based fuel cell tech, rather than combustion, making them non-polluting in their output. Plug derives its hydrogen fuel from clean water sources and can produce, liquefy, transport, and store fuel-grade and purposed pure hydrogen. Plug’s fuel cell tech has found applications as backup power generators and as portable battery power sources, and are particularly valuable as stand-alone power sources for warehousing and industrial machinery.
Plug has become the largest supplier of liquid hydrogen on the world market and is expanding its global business footprint. The company in July announced two important deals, in Europe and Australia. The European project is a secured order for 100 megawatts of PEM electrolyzers, while the Australian project, in the state of Tasmania, involves an order to install two 5-megawatt PEM electrolyzer units. Plug has deployed over 60,000 fuel systems to date, and its hydrogen fueling network includes more than 180 stations.
HSBC’s Samantha Hoh is impressed by the scale of Plug’s business, and its projected ability to meet the expectations of its expanding business. She writes of the company in her recent note, “Plug’s first large-scale liquid hydrogen production facility demonstrates the company’s vertically integrated capabilities and tag line of ‘Green Hydrogen at Work.’ Margins should improve materially as the company executes its liquid hydrogen ambitions, with capex to be funded by third-party debt including a conditional commitment from the DOE’s Loan Programs Office (LPO). We expect the company to highlight its expanded offerings at the upcoming 11 October 2023 Plug Symposium.”
In line with her optimistic approach, Hoh gives PLUG shares a Buy rating and her $11 price target suggests ~46% potential upside for the coming year.
Overall, Plug has picked up plenty of attention from the Street’s analysts – 20 recent analyst reviews, including 14 Buys and 6 Holds, give the stock its Moderate Buy consensus rating. The shares are trading for $7.55 and the average price target is strongly bullish; at $18.36, it suggests a powerful upside potential of 143% for the year ahead. (See Plug Power stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.