January 23rd, 2024 | 06:30 CET
Hydrogen sell-off: Invest now in high-tech blockbusters! Nel ASA, Defense Metals, AMD, Rheinmetall
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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.
Nel ASA - Where is the bottom?
Long predicted, now it has come true: The revaluation of the hydrogen sector. The hype industry of 2020/2021 is now losing ground because the growth expectations from the climate transition have not materialized. The technology is too expensive compared to other alternative energy generation methods. The outcome of the last COP28 Climate Conference in Dubai was only mildly supportive of hydrogen, but there was a noticeable adherence to fossil fuels and a renewed push towards nuclear power.
Not good news for Norwegian electrolyser pioneer Nel ASA. Shares have fallen by a full 24% since the start of the year, with market capitalization dropping to a low EUR 740 million. At the end of 2020, the Company was worth more than EUR 5 billion. On the Refinitiv Eikon platform, only 6 of 25 analysts still have a "Buy" recommendation, but there are also three "Strong Sell" votes. The price targets have barely been able to keep pace with the current price decline and are still at an average of around EUR 0.69, a 50% potential on the current price of EUR 0.45. After breaking through the support zone at EUR 0.95 to 1.05, there are no longer any significant support lines on the chart. Nevertheless, keep the share and the sector on your watch list because should the momentum turn at some point, a rapid 100% recovery can be expected.
Defense Metals - Now on everyone's lips
The situation is quite different for future producers of strategic metals. They have become the focus of large organizations that want to secure supply chains, safeguarding Western industries from current and future geopolitical uncertainties. 85% of today's global market supply of rare earths is mined in China and rationed for worldwide demand. Rare earths are among the most critical technology metals and are needed in ever-increasing quantities, especially in the energy transition. They are indispensable for wind turbines, high-performance PCs, fiber optic cables, touch screens and LED lighting, to name just a few application areas. The Western world's dependence on Beijing is currently a hot topic, with Germany alone importing around 250 tons of REE concentrates in 2022.
The Canadian company Defense Metals operates the 8,301-hectare Wicheeda Rare Earth Project. Now, there is new progress data from British Columbia. Defense Metals has entered into a co-design agreement with the McLeod Lake Indian Band (MLIB) to continue project development jointly. The objective of the collaboration is to prepare future feasibility studies and joint environmental assessments. MLIB will also be involved in certain technical studies to advance the energy transition in British Columbia. In connection with the collaboration, MLIB also participated in a private placement at CAD 0.26, involving 2.6 million common shares. This is a strong sign of progress on this project.
This cooperation is again good news for Defense Metals shares. Trading volumes have quadrupled in the last few days compared to the usual volumes, and the share price has gained 70% since December. Given the explosive nature of the "rare earths" issue, further significant transactions can now be expected. Very exciting.
AMD and Rheinmetall - Typical buyers of critical metals
Two exceptionally clean technical breakouts are observed in the US chip manufacturer AMD and the German defense company Rheinmetall. Both companies are a prime example of investors' current focus on sensitive technological applications. At AMD, the boom in the field of Artificial Intelligence has led to a jump in demand for high-performance chips. In the case of Rheinmetall, it is the ongoing geopolitical conflicts that are enabling the export of weapons and defense technology from the EU. This presents Rheinmetall with a completely new scenario for the coming years.
AMD reached a new all-time high of USD 176 last week. According to analysts on the Refinitiv Eikon platform, sales are expected to grow by 10 to 15% annually, and a surplus of USD 6.2 billion is to be achieved in 2024. A corresponding P/S ratio of around 10 is already quite ambitious, and the P/E ratio for 2024 is also a tight 45. Rheinmetall also reached a new all-time high of EUR 339. The valuation has tripled since the beginning of the Ukraine conflict. Sales are growing dynamically at around 20% per year and are estimated to reach EUR 9.5 billion in 2024. However, there may still be one or two positive surprises lurking here. The current 2024 P/E ratio of 17 is not too high, which still makes the Rheinmetall share look attractive.
The 2024 investment year is starting as 2023 ended: High-tech stocks continue to soar with big jumps. Nvidia, Microsoft, AMD and Germany's Rheinmetall set the tone. The key suppliers and explorers of metals used in every high-tech device are also part of the tech rally. Anyone who wants to be part of the future race for strategic raw materials should, therefore, keep an eye on Defense Metals. The Wicheeda project is currently the talk of the town.
Conflict of interest
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