What happened
Plug Power (PLUG 0.63%) stock rocketed on Monday and was up a whopping 14.4% as of 11:50 a.m. ET, but it wasn't the only hydrogen stock rebounding so sharply this morning. Here's how other notable hydrogen fuel cell stocks are faring:
- FuelCell Energy (FCEL -1.41%): Up 14.4%.
- Bloom Energy (BE 9.89%): Up 9.6%.
- Ballard Power Systems (BLDP 2.23%): Up 12.2%.
Today's rally offered a much-needed respite to investors who've watched hydrogen fuel cell shares crash -- some even to their 52-week lows -- in recent weeks. Could today's rebound then signal a bottoming for these hot stocks ahead of earnings?
So what
Soaring inflation, upcoming interest rate increases, rising coronavirus cases, and geo-political concerns, such as the conflict between Ukraine and Russia, have all combined to create the perfect storm for growth stocks. With valuations soaring as well, market participants, right from investors to analysts, started to feel nervous and dumped growth stocks. Barely a week ago, investment bank Truist cut price targets for several hydrogen fuel cell stocks, triggering a sell-off in shares.
Image source: Getty Images.
Nearly every hydrogen fuel cell company is still establishing its business, with profitability nowhere in sight yet. So investors betting on these companies are primarily betting on revenue growth potential for now, which also adds to the volatility in the prices of these stocks. To give you an example, on Jan. 19, Plug Power outlined a revenue target of $900 million to $925 million for 2022 and $3 billion for 2025. Yet, Plug Power stock dropped soon after it announced those big numbers simply because the market was expecting even bigger numbers from the company that's striving to expand the usage of its fuel cell products beyond forklifts.
Yet, stocks within the industry have fallen dramatically within a short span of time, and investors perhaps now see an opportunity to buy even as more nations begin to recognize hydrogen's viability as a source of clean energy. India's largest publicly listed company, Reliance Industries, for example, has just announced plans to invest a whopping $75 billion in renewables, including hydrogen. CEO Mukesh Ambani, also the richest man in India, reportedly wants to make the country a hydrogen hub.
Hydrogen fuel cell technology has primarily found usage in commercial applications for now. Examples include Plug Power's GenDrive fuel cells that power forklifts, Bloom Energy's stationary fuel cell servers that can store and deliver renewable power 24/7, and FuelCell Energy's fuel cell power plants. Yet, there's immense potential in other areas, especially in industries like transportation.
Just days ago, Ballard Power Systems bagged an order for fuel cell modules from railroad giant Canadian Pacific for hydrogen locomotives. On the morning of Jan. 31, Daimler Truck announced a joint venture with BlackRock Renewable Power and NextEra Energy's renewable arm NextEra Energy Resources to develop charging infrastructure for medium- and heavy-duty electric battery and hydrogen fuel cell vehicles across the U.S. Meanwhile, a new study by the International Council on Clean Transportation just projected one-third of all flights could run on green hydrogen by 2050.
Now what
February is an important month for fuel cell stocks as they kick off the earnings season. Of course, you shouldn't expect any of the four companies mentioned here to turn a profit, but investors will at least want to see their top lines grow and losses narrow. Then again, it's hard to predict how the market will react to any number from unprofitable fuel cell stocks. One stock's performance often has a domino effect on other stocks within the industry. Keep that in mind before you hit the buy or sell buttons on hydrogen stocks.
