Electric vehicles (EVs) are becoming mainstream, as the world’s focus on climate change and cutting carbon footprint intensifies. The present Russia-Ukraine conflict and its impact on fossil fuel prices has pushed this trend further.
Names such as Tesla and NIO have been the talk of the town in the EV space, with other major players taking steps towards EVs as well. Concurrently, another trend has been towards the development of hydrogen fuel as an alternative and a push for hydrogen-powered vehicles.
Different companies across different geographies are working on the hydrogen economy. Toyota and Hyundai have developed fuel cell vehicles. Last month, Toyota announced a pilot project for the Mirai car in India. Saudi Arabia has announced the development of a $5 billion hydrogen fuel facility as the country looks to become a leading supplier of hydrogen. Chevron is setting up hydrogen distribution centers in collaboration with a Japanese partner.
On the other hand, Elon Musk has called hydrogen fuel cells “extremely silly” and “fuel cells = fool sells” in the past.
Between these two extremes, let us take a deeper look at two major names, Plug Power (PLUG), and FuelCell Energy (FCEL) which are focused on hydrogen fuel cells, and see how they may perform in the coming periods.
Plug Power (PLUG)
Plug Power provides turnkey hydrogen fuel cell (HFC) solutions for the green hydrogen ecosystem. It has deployed more than 50,000 systems for e-mobility and counts Amazon, BMW, Carrefour, and Walmart among its customers.
Annual revenues are projected to jump from $502.3 million for 2021 to $1.4 billion for 2023. While profitability remains a concern, the company’s net loss per share is expected to narrow to $0.22 per share in 2023 from $0.82 in 2021.
Moreover, a look at the company’s recent tie-ups can provide a glimpse of things to come. Korean electric car maker Edison Motors has tied up with PLUG to bring an HFC-powered electric city bus to the market.
PLUG has also partnered with Atlas Copco Mafi-Trench company and Fives to develop hydrogen liquefaction plants. Hydrogen liquefaction makes the fuel easy to transport, leading to lower costs and a larger distribution reach.
PLUG is the biggest buyer of liquid hydrogen across the globe and aims to supply 500 tons per day of liquid green hydrogen by 2025. The company expects to double this figure by 2028.
The market is betting big on alternative fuels as seen in the price/sales ratio of 31.5 for PLUG, whereas the industry median is at 1.5. The company is investing heavily in future growth, which is indicated by its CAPEX/Sales ratio of 38.3% which is over 13x of the industry median of 2.7%.
Morgan Stanley’s Stephen Byrd has reiterated a Buy rating on the stock alongside a price target of $60. Overall, the Street is Bullish on PLUG based on 10 Buys and three Holds, with a Strong Buy consensus rating and a price target of $40.77, implying a potential upside of 32.33%.
FuelCell Energy (FECL)
The other name on our radar, FuelCell Energy, manufactures proprietary fuel cell technology platforms and targets large-scale power users. The company also offers sub-megawatt solutions for smaller power users in Europe.
Annual revenues are estimated to increase to $160 million in 2023 from $69.6 million in 2021. In its most recent first-quarter showing, FCEL witnessed a 113.7% year-over-year jump in its top line to $31.8 million. At the end of January, FCEL had a backlog of $1.31 billion, which provides visibility into future revenues.
Moreover, the company is also developing a unique carbon capture solution in joint development with ExxonMobil Research and Engineering Company. The solution is designed to capture carbon dioxide, NOx, SOx, and particulates from an external source while concurrently yielding power and hydrogen.
Notably, the company is focusing on driving commercial availability of its advanced technologies solutions, which include distributed hydrogen via electrolysis, long-duration energy storage, and carbon capture.
FCEL’s price/sales ratio of 23.1 indicates investors will have to pay less in the stock for each dollar of sales generated by the company as compared to PLUG. Additionally, the CAPEX/Sales ratio of 97.6% implies, that FCEL is heavily investing in future growth as compared to PLUG.
Cowen & Co. analyst Jeff Osborne has reiterated a Hold rating on the stock alongside a price target of $5.75 implying the stock is fairly priced at current levels. The Street has a Moderate Sell consensus rating on the stock based on five Holds and two Sells. The average FuelCell price target of $5.13 implies a potential downside of 10.6% for the stock.
Closing Note
Despite existing challenges, hydrogen fuel use also provides potential advantages. While EVs need to be charged periodically, fuel cell vehicles use hydrogen as fuel and produce energy onboard. As industry infrastructure expands, the case for HFCs becomes more and more attractive, especially in long-distance transport and heavy vehicles. With incremental technology adoption by the broader market, PLUG and FCEL stand to gain over the long term.
Download the TipRanks mobile app now
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Read full Disclaimer & Disclosure
Related News:
Intel Agrees to Acquire Granulate Cloud Solutions
Nokia Takes Romania to Task Over 5G Ban
Duck Creek Technologies Tank 12.3% on Dim Outlook
