August 17th, 2022 | 13:10 CEST
Hydrogen presses the gas pedal: Plug Power, First Hydrogen, Nel, Ballard Power - 100% rally is real!
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"[...] Why should a modular electrolyzer cost more than a motorcycle? [...]" Sebastian-Justus Schmidt, CEO and Founder, Enapter AG
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Plug Power - After the numbers with a decent rally
Since Joe Biden announced a USD 430 billion stimulus package for climate action and healthcare, GreenTech stocks have been unstoppable. Plug Power is one of the most prominent stocks for investors looking to invest in H2 technology. While the Latham, New York-based company is not yet making a profit, it is nevertheless one of the primary long-term beneficiaries of the current willingness of Western governments to invest.
Critical issues are at stake, such as reducing greenhouse gases and securing future mobility. There are already many concepts for this, which make great sense, especially in regional applications for buses, forklifts and self-sufficient, decentralized energy cells. The "green production" of hydrogen, i.e. the use of alternatively generated energy for the production of H2, remains vital in the overall ecological calculation.
The latest quarterly figures were published by Plug last week. They were in line with expectations, as estimated by analysts before the financial conference. Net loss per share widened from USD 0.18 to USD 0.30 due to high capital expenditures, but at least revenue increased 21.4% to USD 151.3 million. For the full year, the target is USD 915 million, followed by USD 1.38 billion in 2023, which means that the stock is currently valued at a price-to-sales ratio of 18. But that does not bother anyone because the Company is looking to the future and the lights are green. The Plug share has doubled since the end of June, the optimists are celebrating and the pessimists have gone completely quiet.
First Hydrogen - German-Canadian cooperation spurred on
The immediate beneficiary of the German-Canadian collaboration could be First Hydrogen from Canada. The Company recognized early on that a battery drive is not a viable option in the logistics sector. Too long charging cycles and little range are determinants that have so far made a network of delivery vehicles appear unprofitable. With the framework agreement that has now been announced, Canada is one of the first countries that could solve the energy crisis in Germany through the production of green hydrogen.
As is customary with such framework agreements, the contract partner is granted access to the relevant markets with its promising technologies. German technology has already been used in the first commercial development of a production-ready van (LCV) based on a MAN chassis. Ballard Power and AVL Powertrain are responsible for the H2 powertrain. These well-known and well-diversified vehicle technology partners will make international marketing possible after launch. The first prototypes are currently being tested.
Balraj Mann, CEO of First Hydrogen, said, "Green hydrogen offers Canada the opportunity to lead the decarbonization of the G7 nations. Our abundant renewable energy resources, combined with green hydrogen, can significantly reduce carbon emissions and help our country achieve the goal of net zero emissions by 2050. With our strong team, we are positioned to play our part in net zero."
The first round of funding is already underway with the UK government as part of a policy 10 GW hydrogen target, as well as further partnerships to implement a regional hydrogen and fuel cell strategy in the Manchester district. The overarching goal of achieving net zero carbon by 2038 sounds ambitious - but the stage is set. Well-known names such as Hyundai, Toyota and Anglo American are also part of the UK's H2 plans in the logistics sector. A month ago, FHYD shares were available for CAD 2.25 or around EUR 1.70. We had advised to enter, now the stock is 50% higher, not far from the all-time high at CAD 3.57.
Nel ASA and Ballard Power - Highly valued, but good products on the way
Stocks should fall when bad numbers are reported. However, it is not always the case, especially when they were expected and, at the same time, important legislative decisions are on the horizon. So it is not surprising that both Nel ASA and Ballard Power started to rally after their somewhat subdued half-year reports. The performance of industry leader Plug Power also provided the necessary impetus for the rise.
What is striking about the half-year reports is the large order intake at Nel and the significant drop in sales at Ballard Power. Randy MacEwen, president and CEO of Ballard Power, continues to see tough times ahead in 2022 with declining gross margins but believes the transition to commercial production will not take much longer as all governments worldwide weigh in on the issue. With USD 1 billion in cash, a few more rounds of research are possible. At Nel, sales were also below expectations, but the order book reached a new high of NOK 1.44 billion. A capital increase also boosted cash here to NOK 3.6 billion.
On average, analysts see a fair value of around EUR 1.95 for Nel, while Ballard's neutral and sell recommendations outweigh the positive votes. Technically, Nel should not slip below EUR 1.50, but the positive 12-month performance of +20% is impressive. After the numbers, it first went down, but the stock market is probably looking far ahead, considering the price-to-sales ratio of over 20. Payable earnings will not happen before 2025. Ballard Power was up 25% before the numbers but has been going sideways since the event at the EUR 8.55 level. Again, the valuation is off the charts and add to that a skeptical outlook from the CEO. We recommend stopping both stocks at EUR 1.50 and EUR 8.25, respectively, and simply waiting to see what happens.
The hydrogen sector is currently picking up speed again. One might think the big correction is over! In fact, the euphoria after Joe Biden's Climate Bill is back, and now the law must only be finally confirmed. Currently, H2 stocks can gather a lot of momentum. Tight ball management is now necessary - as Franz Beckenbauer would say!
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