03. May 2021 | 10:34 CET
NEL, Plug Power, FuelCell, Royal Helium - Buy or Sell?
What will the energy transition look like in Europe? Hydrogen - the raw material is seen as an alternative building block of a green future and, according to experts, could become one of the most important energy sources in the coming decades. Water is plentiful, and the only thing missing is a truly environmentally friendly way to produce it. Even under the best conditions, producing green hydrogen costs about 10 times as much as Russian natural gas, which also burns fairly cleanly overall. We have not even considered the electro-technical efficiency.
time to read: 4 minutes by André Will-Laudien
"[...] We expect the first three wells to be drilled, cased, completed and tested by the second week of March [...]" Andrew Davidson, CEO, Royal Helium Limited
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 - Key resistances not met
The high production costs are one of the main reasons why no country in the world has yet been able to implement any of the visionary H2 concepts on a large scale. Germany wants to change this in the future and is digging deep into its pockets to do so with a EUR 700 million funding program. By 2030, according to the plans, H2 generation capacities of up to 5 gigawatts are to be created in this country - that would be 50 times more than the 100 megawatts available today.
Nel ASA is a globally operating Norwegian Company based in Oslo, which is involved in solutions for hydrogen production from electrical energy and its storage and distribution. The stock was able to benefit from the big hydrogen hype at the end of 2020, gaining over 200% in 6 months. However, since the high in January at EUR 3.40, the share price has been on a downward trend, and the most recent upward price reversal also failed at the EUR 2.60 resistance.
For the first time, the British investment bank Panmure Gordon & Co Limited issued an assessment for Nel ASA. According to the Bloomberg business agency, the 140-year-old traditional institute based in London concludes that the Nel share is now a buy with around 30% potential. However, we remain skeptical and see the price target for 6 months below EUR 2 rather than above. So far, we are pretty good in our trend analysis.
Plug Power - New hope with BEA Systems
With Plug Power, the spirits also divide. We pointed out the dramatic overvaluation of the share early on. Since mid-January, the stock has now lost over 60%. Last week after the manufacturer of fuel cells announced cooperation with BAE Systems, there was a slight bounce in the share price. However, there is a big question mark behind the collaboration, which is why the share had to give up all gains again during the day.
The two companies plan to offer zero-emission powertrains for heavy-duty buses in North America with the published framework agreement. Plug Power's fuel cell engines are to be integrated into BAE Systems' electric drive systems. In addition, a modern refueling infrastructure for consumers in the US is to be established.
At first glance, this cooperation seems to offer an advantage for both players. Plug Power benefits from the size of the world's third-largest defense company in terms of sales, whereas BAE Systems could transform its image from a traditional industrial and defense company to a hydrogen player. Whether this transformation is more than just marketing will have to be seen in the coming months because anyone who takes the H2 theme seriously will have to invest heavily. We will continue to keep the Plug Power share closely on our radar; we do not yet see an upward trend reversal.
FuelCell Energy - Will it still work?
We conclude our journey through the hydrogen sector with Fuelcell Energy (FCEL). FCEL stock is down a whopping 68% since its February highs, so it is still not cheap. In looking at FuelCell stock, it is essential to remember that while the stock is down two-thirds since February, it is still up over 360% since October 30. As always, it is a matter of perspective.
Even the best growth stocks almost always experience periods of weaker trading. The further into the future the projected gains are, the more volatility you are likely to see in the near term. The initial hype around hydrogen clearly ended in January 2021, so when and if the stock market will pick up this theme again is questionable.
There is one glimmer of hope: the global environmental movement has solidified with Joe Biden and the green jolt in Europe. Since Donald Trump has been out of the spotlight, leaders are concerned about climate change, even US Republicans. Companies today are maximizing efforts to reduce their environmental footprint, so hydrogen could be part of a greener future. This scenario also presents an opportunity for FuelCell to take off again in the second wave. We will stay tuned.
Royal Helium - Scarcity also in the noble gas sector
We move away from hydrogen towards helium. Both elements are ranked first and second in the periodic table; hydrogen only exists in bound form and helium is a rare noble gas. It is colorless, odorless, tasteless and non-toxic. Besides neon, helium is the only element for which, even under extreme conditions, no compounds could be detected so far that would not have decayed immediately after formation.
Today, helium is in great demand as a technical gas by the fiber optics, computer and aerospace industries. It is also used as a coolant in nuclear power. Customers such as Airbus, NASA and SpaceX are making the rounds, but there are only a few suppliers. Canada's Royal Helium Ltd. is focused on exploring and developing a major helium production project in southern Saskatchewan. With more than 400,000 hectares of prospective acreage held under permits and leases, Royal is one of the largest helium producers in North America. Canada has the fifth-largest helium reserves globally and is increasingly in the spotlight of international technology producers.
Royal Helium's initial gas sample results show elevated and economic concentrations of helium from several formations in the Climax Helium Project, with concentrations ranging from 0.33 to 0.94% from the Deadwood, Souris River and Duperow formations. The Company will now begin long-term production testing in the most prospective zones to confirm flow rates and, ultimately, the size of the resource. Production could then start in as little as 6 months if all goes to plan.
RHC shares have consolidated a bit recently, and you can now buy again at CAD 0.52. Because of the helium shortage, the value had increased tenfold at the peak since May 2020. The RHC share is in particular demand among investors looking at the big economic upswing after the pandemic.