Stock Market

In the global push for clean energy, interest and investment are increasing within the hydrogen economy. This translated into a massive rally for some of the best hydrogen stocks during the market euphoria of 2021. However, a deep correction in hydrogen stocks followed with cash burn, and equity dilution was a concern among emerging names.

This provides a good opportunity to consider exposure to the best clean energy stocks. Specific to the hydrogen economy, the investments are just the tip of the iceberg. To put things into perspective, the demand for hydrogen touched 87 million tons in 2020. Demand is expected to increase to 500 to 680 million tons by 2050. Given this potential, quality hydrogen companies will be positioned for multi-fold growth in the next ten years.

Let’s discuss three of the best hydrogen stocks to buy to benefit from positive industry tailwinds.

Plug Power (PLUG)

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Plug Power (NASDAQ:PLUG) stock has witnessed a sharp correction of 51% year to date (YTD). With the short interest in the stock still at 25%, a massive short-squeeze rally is possible.

Additionally, Plug Power has ambitious growth plans as the global hydrogen economy gains traction. However, it’s important to mention that operating level losses remain a concern. Investors don’t know if the Company can scale-up its business significantly in the next five years.

For example, the company expects revenue of $1.2 billion for the year. Plug Power has guided to increase revenue to $6 billion by 2027 and further to $20 billion by 2030. This will be associated with significant margin expansion.

However, the markets are likely to be in a wait-and-watch mode to determine the execution capability. If the growth trend is positive, PLUG stock is likely to skyrocket.

Air Products and Chemicals (APD)

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Air Products and Chemicals (NYSE:APD) is a blue-chip clean energy stock that trades at an attractive forward price-earnings ratio of 20. Further, APD offers a dividend yield of 2.69%.

Air Products has a high financial flexibility factor that makes it bullish. Unlike Plug Power, the company doesn’t need to massively dilute equity for investing in big hydrogen projects. For 2024, the company is targeting capital expenditure in the range of $5 to $5.5 billion.

APD is investing $4.5 billion in the world’s largest blue hydrogen production facility in Louisiana, expected to be operational in 2026. Further, Air Products expects to invest $7 billion in the world’s largest green hydrogen project. It will partner with ACWA Power and NEOM, Saudi Arabia. As these mega projects are operationalized, the company’s revenue and cash flow visibility will swell.

Bloom Energy (BE)

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Bloom Energy (NYSE:BE) has been spiraling downtrend YTD. Yet, with the company reporting strong Q3 2023 numbers, a sharp rally is impending. Therefore, it’s time to consider fresh exposure to BE stock.

For Q3 2023, Bloom Energy reported record revenue of $400.3 million, which was higher by 36.9% on a year-on-year (YOY) basis. Concurrently, BE reported positive adjusted EBITDA of $66.4 million, as compared to an EBITDA loss of $13 million in the prior year quarter. Also, the company has reaffirmed its full year revenue outlook of $1.4 to $1.5 billion.

The company’s solid oxide fuel cell has already been deployed across industries like healthcare, data centers, critical manufacturing, and retailers. As the demand for hydrogen fuel cell increases, the outlook is bullish for revenue and cash flow growth.

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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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