High-Flying Hydrogen Energy Companies.

High-Flying Hydrogen Energy Companies.

October 28 2020

As we wrote in a recent memo, hydrogen gas is on its way to playing a major role in helping to replace the fossil fuels we use to run our economy. It can be used to run trucks and to make aluminum and steel and for other high heat applications. Companies all around the world are making big investments to manufacture, transport, store and utilize hydrogen to replace natural gas, diesel fuel, gasoline and propane. We look today at a few of them. Their stock prices are up 5X this past year. We are not promoting purchases of these stocks but highlighting the attention being paid to this sector of the clean energy revolution.

Plug Power designs and manufactures fuel cell systems that use hydrogen to make electricity to run vehicles and other machinery. The company, which got its start making hydrogen fuel cell-based forklifts (exhaust-free vehicles for warehouses), received a $70 million investment from Amazon in 2017. Since then the company’s stock price (NASDAQ: PLUG) has increased from $2 a share to over $15. The company’s market cap of $5.5 billion is 21 times trailing twelve months revenue of $260 million. The Latham, NY-based company is now designing stationary power and delivery vehicle fuel cells and plans to work with partners to develop green hydrogen production and distribution networks.

Ballard Power Systems, founded in 1979 in Toronto, Canada, is a leader in the design and manufacture of proton membrane exchange fuel cell systems. In the last year, its stock (NASDAQ: BLDP) tripled from $5 to $15. The company’s market cap of $4 billion is 33 times revenue of $116 million. In 2018, Ballard formed a partnership with China’s Weichai Power to make fuel cells for trucks, buses and forklifts for the Chinese market. Ballard is also working with Audi to make automotive fuel cells.

Bloom Energy Corporation’s hydrogen electrolyzer technology is based on its founder's work for NASA to convert Martian atmospheric gases to oxygen and electricity. Headquartered in California, Bloom makes electrolyzers and solid-oxide fuel cell systems for on-site power generation. The company provides energy solutions for a multitude of corporations, including banking and financial services, technology and data centers. Bloom’s stock (NYSE: BE) is up 5x in the past year, from just under $3 to $16. Instead of precious metals, Bloom’s fuel cells use wafers made from sand that are stained with proprietary ink.

FuelCell Energy From the 1970s to 1990s, with sponsorship from the US military, FuelCell began manufacturing low-temperature fuel cells and high-temperature carbonate fuel systems, both of which proved to have potential in commercial applications. The Connecticut-based company makes stationary fuel cell power plants for distributed power generation. FuelCell serves a variety of markets, such as utilities, industrial applications, water treatment, and health care providers. In the past year, its stock (NASDAQ: FCEL) has increased nearly 7x, from $0.31 to over $2.20. The company has a business plan to capture the hydrogen markets in Europe, Asia, and North America and is also involved in a joint venture with Toyota to develop a hydrogen battery for motor vehicles.

There are dozens of startups in the hydrogen space. The investment momentum of these stocks is heavy, pushing valuations to 10-20+ times revenue on companies that have rarely made a profit. But according to Forbes: “One thing is certain – hydrogen is no longer a “niche” fringe fuel. The element will play a critical role in the decarbonization of sectors where electrification is not possible, with fortunes to be built along the way. The green hydrogen revolution has already begun.

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