Get Charged up Over Fuel Cell Stocks

10/13/2020 5:00 am EST

Focus: ENERGY

Timothy Lutts

Publisher, Cabot Heritage Corporation

If you’re looking to make big profits in the energy sector, renewable energy stocks are the best choice; here are 2 aggressive ways to play the sector, notes Timothy Lutts, editor of Cabot Stock of the Week.

Plug Power (PLUG) is a stock I’ve known since 2000, when it was one of the tech stocks that flew to giddy heights in the final phase of the dot-com bubble — and then crash-landed.

Basically, it was ahead of its time. The stock had another strong run in 2013 — but that too was followed by years of retrenching, and now here we are again, with PLUG strong technically and, hopefully, strong financially as well.

To be clear, Plug Power is not a dot-com stock; its technology is based on fuel cells, which use hydrogen today to generate electricity in the harshest off-grid environments, which power electric industrial vehicles like forklifts, and which will soon be powering on-road vehicles as well — as the hydrogen market develops.

By the end of 2020, the firm expects to have shipped 40,000 fuel cells, to have more than 100 fueling stations, and to be through-putting more than 40 tons of hydrogen per day.

Financially, the company has not yet turned profitable, and there are no profits visible in the year ahead, but 2019 saw revenues of $230 million, up 28% from the year before and 2020 should see revenues of $335 million, up 46% from last year.

As for the stock, it’s hot, hitting new highs. Given its history, there’s reason to be leery of PLUG, but I wouldn’t argue with the stock today.

Bloom Energy (BE) is a fuel cell stocks. These cells generate electricity from natural gas, biogas or hydrogen to provide highly reliable on-site power to liberate businesses (like Walmart, Ikea, Oracle and eBay) from unreliable electric grids.

Bloom’s solid oxide fuel cells are designed as server modules, which are linked together to create a power system that’s as large or small as the customer desires.

At present electricity from such a system is still more expensive than grid power; reliability and low emissions are the attractions. But within the next decade, management expects price parity. And before then, the marine market may take off.

In late June, management disclosed a partnership with Samsung Heavy Industries, which is the world’s third-biggest shipbuilder, to provide power plants for ships (which would help comply with the International Maritime Organization’s mandate to meet emissions reduction targets by 2050).

Revenues in 2019 were $930 million, up 26% from the year before, and are expected to grow to $943 million this year. Earnings are not in sight yet, but the stock has been gaining strength and just recently broke out to a new high  so it can be bought here, too.

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