Stocks to buy

Any industry or business that’s related to energy transition is poised for multi-fold growth through the decade. Be it electric vehicles, energy transition metals, or the green hydrogen economy. With the markets in a recovery mode after a deep correction in 2022, it’s a good time to accumulate energy transition stocks. This column focuses on hydrogen stocks that are poised for multi-bagger returns in the coming years.

To put things into perspective, the global demand for hydrogen was 87 million metric tonnes globally in 2020. Demand is expected to increase to 212 million metric tonnes by 2030 and further to 528 million metric tonnes by 2050. Another estimate indicates that demand is likely to grow to 660 million metric tonnes by 2050. This growth estimate backs the case for sustained growth in some of the best hydrogen companies.

Given the bullish outlook, let’s discuss three millionaire-maker hydrogen stocks to buy and hold.

Air Products and Chemicals (APD)

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Air Products and Chemicals (NYSE:APD) is my top pick among hydrogen stocks. The reason is that APD is a blue-chip stock that trades at an attractive valuation. Further, a dividend yield of 2.38% is healthy.

Being a blue-chip, Air Products has a strong balance sheet. While there are several emerging hydrogen stocks, Air Products has the highest financial flexibility. This will allow the company to make aggressive investments in the coming years. To put things into perspective, Air Products reported an investible cash flow of $1.7 billion in the last 12 months.

If we look at specific investments, Air Products and AES will be building the largest green hydrogen facility in North Texas. The cost of the project is estimated at $4 billion.

Separately, the company will be investing $4.5 billion in the world’s largest blue hydrogen production facility in Louisiana. A NEOM green hydrogen complex is also being built in Saudi Arabia. With a strong investment pipeline, the growth outlook is robust and I expect APD stock to trend higher.

Plug Power (PLUG)

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In the last 12 months, Plug Power (NASDAQ:PLUG) stock has declined by 38%. It however seems that the correction is overdone and PLUG stock is poised for a strong reversal rally.

An important point to note is that Plug Power is still at an early growth stage. For Q1 2023, the company reported revenue of $210.3 million, which was higher by 49% on a year-on-year basis. By 2026, the company expects $5 billion in annual sales.

Furthermore, sales will swell to $20 billion by 2030 with a gross margin of 35%. Purely based on the total addressable market, the target seems achievable.

It’s also worth noting that the company has guided for a 10% gross margin for 2023. Therefore, significant margin expansion is on the cards. If this ambitious target is achieved, PLUG stock is positioned for multi-bagger returns.

Bloom Energy (BE)

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Bloom Energy (NYSE:BE) stock has been sideways for the last 12 months. A big breakout on the upside seems imminent backed by positive business developments. Recently, RBC assigned an “outperform” rating for Bloom with a price target of $24. This would imply an upside potential of 36.4% from current levels.

As an overview, the company’s solid oxide hydrogen fuel cell technology can be used for accelerating the production and usage of hydrogen. Like Plug Power, the company is in an early growth stage with 2023 revenue likely at $1.45 billion. However, the company expects 2031 revenue to be in the range of $15 to $20 billion.

Another important point to note is that the solid oxide fuel cell has been deployed in applications across healthcare, manufacturing, retail, and data centers, among others. The global addressable market is to the tune of $2 trillion by 2030. The overall outlook is therefore bullish.

On the date of publication, Faisal Humayun did not hold (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 Publishing Guidelines.

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