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Forget FuelCell Energy, Buy These 3 Hydrogen Stocks Instead

Published 12/09/2021, 10:25 AM
Updated 12/09/2021, 11:30 AM
© Reuters Forget FuelCell Energy, Buy These 3 Hydrogen Stocks Instead

© Reuters Forget FuelCell Energy, Buy These 3 Hydrogen Stocks Instead

FuelCell Energy’s (FCEL) shares soared after President Biden’s $1 trillion-plus infrastructure bill was passed but have been on a price decline over the past few weeks. Furthermore, the stock looks overvalued at its current price level. So, we think hydrogen stocks Cummins (CMI), Plug Power (NASDAQ:PLUG), and Ballard Power Systems (NASDAQ:BLDP) could now be better additions to one’s watch list. Wall Street analysts expect them to gain significantly in the coming months. So, let’s discuss these names.Integrated fuel cell company FuelCell Energy, Inc. (FCEL), which is based in Danbury, Conn., manufactures fuel cell technology platforms for power generation. The company’s revenue for its fiscal third quarter, ended July 31, 2021, increased 43.3% year-over-year to $26.80 million. Its gross profit came in at $1.10 million, compared to a $3.12 million loss in the year-ago period. Also, its shares have gained 33% in price over the past three months to close yesterday’s trading session at $7.61.

However, FCEL is currently trading 74.1% below its 52-week high of $29.44, which it hit on February 10, 2021. The stock soared in price after the $1 trillion-plus bi-partisan infrastructure bill was passed, which is expected to boost the demand for fuel cell power plants. However, Wall Street analysts expect the stock to hit $7.33 in the near term, indicating a potential 3.7% decline. The stock looks overvalued at the current price level. In terms of forward EV/S and P/S, FCEL’s respective 31.84x and 36.26x are higher than the 2.01x and 1.65x industry averages. In addition, its 11.53x forward P/B is 284.8% higher than the 3x industry average. So, the we think stock is best avoided now.

Even though hydrogen-fuel infrastructure is in its early stages of development, the industry is expected to witness significant growth in the long run, with governments moving to decarbonize fuel and promote clean energy usage. According to a BlueWeave Consulting report, the global green hydrogen market is expected to reach $6.84 billion by 2027, growing at a 57.7% CAGR. So instead of betting on FCEL, we think it could be wise to add hydrogen stocks Cummins Inc . (NYSE:CMI), Plug Power Inc. (PLUG), and Ballard Power Systems Inc . (BLDP) to one’s watch list now. Wall Street analysts expect these stocks to soar more than 20% in price in the near term.

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