Hydrogen stocks have been red-hot over the past year as the ESG and clean energy momentum went into overdrive. Hydrogen fuel cell stalwarts Plug Power Inc. (NASDAQ:PLUG), FuelCell Energy (NASDAQ:FCEL), Bloom Energy Corporation (NASDAQ:BE) and Ballard Power Systems (NASDAQ:BLDP) were all up in triple-digits as a growing section of Wall Street punters including Bank of America declared that the industry had reached a tipping point and was finally ready to take off.
Meanwhile, the EU made major commitments to invest in green hydrogen.
But maybe Wall Street rushed its fences.
Hydrogen stocks have been stinking the place out this year, with the leading stocks down in double-digits at a time when their oil and gas peers have been soaring.
To wit, PLUG is down 26.5% in the year-to-date; FCEL has lost 28.8%, BE is -31.6%, while BLDP has cratered 38.9%.
In sharp contrast, the Energy Select Sector SPDR ETF (XLE) has emerged as the best-performing sector with a 44.4% YTD gain.
The shocking turn of fortunes can be chalked up to stratospheric valuations in the hydrogen sector at a time when value stocks are coming back in rotation.
However, long-term investors in the hydrogen sector can still take some comfort in that the worst might be in the rear-view mirror, and hydrogen stocks could be poised for a comeback.
Here are some encouraging signs.
#1 Plug Power's Financial Restatements is Done
Plug Power, the hydrogen sector's best-known name, has surged nearly 25% over the past five days after the company completed the restatement of previously issued financial statements for FY 2018 and FY 2019 and quarterly filings for 2019 and 2020, and also filed its FY 2020 annual report.
This has helped to "dissipate the shroud of uncertainty that has been hanging over Plug shares" for months.
As expected, the adjustments had zero effects on Plug's cash position, gross billings, business operations or economics of commercial arrangements.
They dinged earnings a bit, though.
Adjustments from the restatement and finalization of the 2020 annual report took a $0.10/share toll on 2020 earnings and a $0.03 negative impact to 2018 earnings.
Better still, the company has reiterated its previous forecast for annual gross billings targets of $475M in 2021, $750M in 2022 and $1.7B in 2024.
For Q1 2021, Plug says it expects net revenue to clock in above $67M and gross billings above $70M.
For Q2 2021, the company still sees net revenue above $102M and gross billings above $105M.
#2. Hyundai Invests in the U.S. hydrogen sector
For decades, hydrogen has been touted as the future of mobility. In fact, there was a time not too long ago when hydrogen was presumed to be "the fuel of the future" while electric vehicles were expected to remain confined to a niche of small, short-range urban cars.
Yet, it's battery-electric vehicles (BEVs) that have hit the fast lane while their hydrogen-powered brethren appear to have stalled on the start line.
Case in point: Some 330,000 plug-in electric cars were sold in the U.S. in 2019 compared with just 8,000 FCEVs.
But that might be about to change.
Last year, South Korean multinational automotive manufacturer Hyundai Motors (OTC:HYMTF) partnered with British multinational chemicals company Ineos Group to manufacture FCEVs in the United Kingdom.
And now, South Korea's second-biggest conglomerate by revenue has committed to substantial investments in FCEV infrastructure in the United States.
Hyundai Motor Group plans to invest $7.4 billion in the U.S. over the next four years to make electric vehicles and expand hydrogen refueling stations, among other clean-energy investments.
Hydrogen fueling infrastructure in the United States is woefully lacking: California, the leading EV state in the country, boasts a grand total of 40 public hydrogen fueling stations compared to nearly 21,000 EV charging stations. Mind you, California is currently the only state in the U.S. that has a network of hydrogen fueling stations. Related: Oman Plans Massive $30 Billion Green Hydrogen Project
The global FCEV market was valued at just $652M in 2018 but is expected to expand at a brisk 67% CAGR to hit $42B by 2026 driven by the ESG trend, high initial investment in infrastructure, increase in government initiatives for the development of hydrogen fuel cell infrastructure, technological advancements and future potential.
#3. Cummins' Hydrogen Breakout
Stocks of legacy automobile manufacturers such as General Motors (NYSE:GM), Ford (NYSE:F) and BMW (OTCPK:BMWYY) have gained a new lease of life after belatedly going all-in into the EV megatrend.
Indeed, General Motors has vowed to end production of all diesel and gasoline-powered cars, trucks, and SUVs by 2035 as part of the company's plan to shift its entire new fleet to electric vehicles.
GM also says it plans to use 100% renewable energy to power its U.S. facilities by 2030 and in its global facilities by 2035 and intends to become GM carbon neutral in both its global products and its operations by 2040. Further, the automaker says it will focus on offering zero-emissions vehicles across a wide range of price points and work with various stakeholders to build out the necessary charging infrastructure while promoting consumer acceptance.
And now something similar is happening to ICE manufacturers that are pivoting heavily to hydrogen.
Shares of Cummins Inc. (NYSE:CMI) have been soaring after BofA Securities analyst Ross Gilardi said it's time to buy, as the engine maker stands to benefit from the inflation and hydrogen trades more than its peers.
Gilardi says the company has been "far more upfront about the secular risks to its diesel engine business from battery electric and hydrogen" than its peers, such as Caterpillar Inc. (NYSE:CAT) and has also been far more aggressive in investing in these new categories.
The BofA analyst says Cummins' hydrogen and new power assets could be worth $25 per share for the stock, or nearly 10% of the stock's share price.
By Alex Kimani for Oilprice.com
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