March 22nd, 2023 | 10:42 CET
Subsidies beckon, shareholders profit: Volkswagen, NEL, First Hydrogen
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"[...] We can convert buses and trucks to be completely climate neutral. In doing so, we take a modular and incremental approach. That means we can work with all current vehicle types and respond to new technology and innovation [...]" Dirk Graszt, CEO, Clean Logistics SE
Volkswagen: Cash windfall from South Carolina
It is obvious that large industrial companies are very selective in their choice of locations and explore every detail. Volkswagen recently received USD 1.3 billion in state aid from the US state of South Carolina - in exchange for which VW is building a large plant there. In the race for jobs and tax revenues, more and more states are willing to put up the money. But how do VW shareholders stand to benefit?
Subsidies have always been part and parcel of big industrial companies. Grants have been flowing for decades. Large companies like VW even have employees in their ranks to obtain such funds. When subsidies flow, as they have recently, it is initially good news, but it is priced into the share price and is not really a surprise. In the case of VW, the latest events are by no means likely to help the share price get off the ground. The share has been in a downtrend for a year and is currently trading near its lows. The current uncertain situation is not triggering any euphoria at VW.
NEL: Share with relative strength
The situation is different for smaller companies like NEL. NEL is a growth company that has traded on the stock market for years at high prices, low turnover, and much hope. The interest rate turnaround that has been underway for months is weighing on these companies. Subsidies give hope. In the case of NEL, there is also the fact that for smaller companies, every successful grant from government agencies is also a kind of accolade. In the past few quarters, this positive news has become more frequent - both the volume and quality of orders have improved. This is one of the reasons why NEL's shares have held up well and are even trading higher on a six-month horizon. Hopes of an end to the interest rate turnaround could also positively impact NEL's share price. Investors can continue to keep the stock on their radar.
First Hydrogen: Something big is happening here
When it comes to hydrogen, the shares of First Hydrogen are also interesting. The Company is primarily concerned with converting light commercial vehicles. In doing so, the Company takes a variable approach and aims to offer customers customized solutions. In the UK, potential customers can already take a closer look at prototypes and test them from March. In order to benefit even more from the growing subsidy packages, First Hydrogen wants to cover even larger areas of the hydrogen value chain. It is also involved in hydrogen filling stations and electrolysis.
The research portal researchanalyst.com writes concerning the evaluation of the value chain: "Here, a joint venture was founded with FEV Consulting GmbH to develop a prototype for a customized refueling system for the hydrogen mobility market. Furthermore, the Company, which currently has a market capitalization of CAD 189.21 million, plans to produce and distribute green hydrogen in-house in North America, Europe and the UK." Further, researchanalyst.com points to a brightening chart picture. First Hydrogen's stock has been characterized by great relative strength in recent months. On a one-year view, the share is up about 30%. First Hydrogen can be considered a speculative investment due to the exciting market for hydrogen-powered light commercial vehicles and its expansion plans. In the past, the market has certainly appreciated this investment story. As a small company, First Hydrogen could also benefit disproportionately from subsidies.
Especially around green investments, the sources of subsidies are bubbling up. But investors should be careful. Subsidies alone are not a sign of quality - too often, governments sink capital into destructive projects. Subsidies are also of little consequence for large stocks such as VW. In the current situation, however, the prospect of government support for growth companies in the Greentech sector can have a stabilizing effect and support share prices. First Hydrogen, like NEL, is an example of this.
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