The clean energy industry has been picking up steam lately, as more and more countries are pledging to reach carbon neutrality by the middle of the century. As a result, renewable energy stocks experienced a massive rally in 2020 and the beginning of 2021.
However, since then the rally has cooled off significantly, as seen by the 9% decline in the KraneShares Electric Vehicles & Future Mobility Index ETF (KARS) from its 52-week high and the 39% decline in the Invesco Solar ETF (TAN) from its yearly high.
Hydrogen stocks have also moved off the highs set in January 2021 and now could be a great time for investors to scoop up shares of quality companies. Hydrogen fuel cells are cost-effective and reliable, providing a wide range of commercial uses that complement conventional battery technology and that facilitate the transition to cleaner energy.
In this article we’ll analyze two hydrogen stocks, Plug Power (PLUG) and Ballard Power Systems Inc. (BLDP). Not only are these companies leaders in this industry but Wall Street analysts are predicting significant rallies for their stocks.
Plug Power Inc.
Plug Power (PLUG) is a leading provider of hydrogen fuel cell systems for the electric mobility and stationary power market in North America and Europe. The company offers a wide range of solutions to customers transitioning to fuel cell power and is the largest buyer of liquid hydrogen globally. PLUG has also deployed over 40k fuel cell systems for e-mobility and is now leveraging its know-how to rapidly expand into other key markets including zero-emission on-road vehicles, robotics and data centers.
Since the beginning of the year, PLUG declined moderately, down about 4% to $32.43 per share.
PLUG is not expected to turn a profit in the next three years, but the company has reduced its yearly loss significantly compared to 2020, down more than 3x to $141m. In terms of top-line, sales doubled compared to 2019, reaching $464m versus $230m two years ago.
Yet, the company is net cash positive, with $3.78b expected at the end of 2021. Besides, this year, PLUG is investing massively to diversify its income stream and the company is expected to multiply its Capex by 26x year-on-year to $573m.
Looking at PLUG’s valuation metrics, the company is currently trading at a price to book ratio of 4.31x and has a P/E ratio of -132x. That being said, the company looks overpriced, but with the recent hype in clean energy stocks and given PLUG’s growth prospects, long-term investors should take these numbers with a grain of salt. Besides, most Wall Street analysts are recommending buying PLUG, with an average target price of $48.07 per share, representing an upside of 54%.
Ballard Power Systems Inc.
Ballard Power Systems (BLDP) is a Canada-based company and a world leader in proton exchange membrane (PEM) fuel cell development. BLDP is focusing on power product markets and has delivered over 850 megawatts of fuel cell stacks modules and systems to a range of industries such as transit buses, rail, trucks, automobiles, maritime and material handling.
Looking at BLDP financials, sales are mostly flat year on year and versus pre-pandemic levels. Indeed, net sales are expected to reach $103m this year, compared to $104m in 2020 and $106m in 2019. However, the fuel cell designer is expected to increase its net cash position by 60.8% year on year to $1.2b. On the other hand, BLDP’s bottom line is not that good looking, with an anticipated loss of $39.1m in 2019, the company is expected to increase its losses this year by 39.1% to $54.4m.
Yet, valuation metrics are slightly less excessive than PLUG’s. BLDP trades at an expected price to book of 3.95x in 2021 and at a 2021e P/E ratio of 92.9x. While the company might not turn a profit in the following year, the transition to clean energy will probably give a boost to BLDP’s profitability and provide some support to this pure fuel cell producer. Furthermore, the consensus of analysts is constructive for BLDP, with 7 buy and 6 hold recommendations and an average target price of $24.73, the company has an upside potential of $38% in the coming months.