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Hydrogen stocks are weak right now. However, as the green energy movement grows in both the public and private sector, that could change quickly. Investors should use this dip as a buying opportunity.
Countries all around the world are pledging to cut emissions. The U.S. has promised to reduce emissions by 50% to 52% over the next several years, and Europe wants to cut CO2 emissions by 55%. China also says it’ll stop releasing CO2 in the next 40 years.
Pledges to cut emissions could usher in an era of clean hydrogen power. After all, according to the Clean Hydrogen Future Coalition, “clean hydrogen has the ability to accelerate decarbonization across all sectors of our economy.”
So far, it looks like this could be the case in the United States. The U.S. Department of Energy (DOE) just announced it will spend $52.5 million on clean hydrogen technology projects.
On top of that, several firms and analysts believe hydrogen will surge in popularity as a green energy source. Goldman Sachs and Bank of America say the hydrogen market could be worth up to $11.7 trillion. The Next Web contributor Andrea Hak noted, “green hydrogen has long been hailed as ‘the fuel of the future,’ and the alternative that could revolutionize our energy system.”
As demand for green energy increases, those catalysts could fuel upside for these three hydrogen stocks:
- Defiance Next Gen H2 ETF (NYSEARCA:HDRO)
- Bloom Energy Corp. (NYSE:BE)
- Ballard Power Systems (NASDAQ:BLDP)
Hydrogen: Defiance Next Gen H2 ETF (HDRO)
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One of my favorite ways to trade explosive sectors is with an ETF, such as the Defiance Next Gen H2 ETF. Here’s how the company describes this ETF, known as HDRO:
“HDRO, the Defiance Next Gen H2 ETF, tracks the BlueStar Global Hydrogen & Next Gen Fuel Cell Index. The rules-based index tracks the performance of a group of globally listed equities and of companies, who generate at least 50% of their revenue from their involvement in the development of hydrogen-based energy sources, fuel cell technologies and industrial gases.”
ETFs offer great exposure and industry diversification at a lower cost than a direct investment. HDRO is a great way for investors to be introduced to stocks in the hydrogen market.
At the moment, HDRO trades at $21.50 per share at double bottom support. Some of its top holdings include Plug Power (NASDAQ:PLUG), Ballard Power, Bloom Energy, Ceres Power Holdings (OTCMKTS:CPWHF), Fuelcell Energy (NASDAQ:FCEL) and ITM Power (OTCMKTS:ITMPF).
Bloom Energy (BE)
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After failing to break triple top resistance around $27.50, shares of Bloom Energy caught double bottom support around $20.60. From here, I’d like to see the stock retest a prior high of about $45. This should be achievable given the explosiveness of the hydrogen sector.
Bloom Energy is focused on hydrogen fuel cell energy solutions. Most recently, the company and its Korean partner, SK Engineering & Construction, deployed 100 kilowatts of hydrogen-powered solid-oxide fuel cells. Notably, the hydrogen fuel cells generate zero-carbon electricity.
Even better, Bloom Energy and Baker Hughes (NYSE:BKR) are working together to commercialize and deploy hydrogen solutions for energy transitions. These efforts will be important as public and private sector groups push for more green energy solutions.
Earnings growth has been just as impressive. In the first quarter of 2021, revenue rose 23.8% year-over-year (YOY) to $194 million. Additionally, product revenue was up 38.5% YOY to $137.9 million. Finally, gross margins of 28.2% increased by 15.5 percentage points YOY from 12.7%.
Hydrogen: Ballard Power Systems (BLDP)
Source: Pavel Kapysh / Shutterstock.com
Ballard Power Systems develops and manufactures clean energy fuel cells and provides energy solutions. At $15 per share, BLDP stock has become an oversold bargain.
Last week, the company won a contract for 15 70-kilowwatt “FCmove” fuel cell modules from Tata Motors. The modules will power zero-emission fuel cell electric buses, as noted in a company press release. The buses will be deployed in India by 2022.
Additionally, company earnings have been solid. Ballard Power President and CEO Randy MacEwen stated the following:
“In Q1, we delivered revenue of $17.6 million, gross margin of 15% and ending cash reserves of $1.27 billion. Although the China market remained muted while awaiting further policy pronouncements, activity levels were high across the entire Ballard organization. Indeed, on the commercial front, we witnessed unprecedented customer and industry engagement across our markets.”
With strong financials and a venture into public transportation, BLDP stock has great potential to rise from its current dip. The low share price is a unique opportunity for investors looking to add to their green energy portfolio.
On the date of publication, Ian Cooper 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.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.