With the global push towards decarbonization and cleaner energy, stocks like Plug Power, Inc. (NASDAQ:PLUG), FuelCell Energy, Inc. (NASDAQ:FCEL), and Nikola Corporation (NASDAQ:NKLA) have become high-risk, high-reward investments.
So, how do these three stocks stack up and which are worth investing in?
Plug Power
Plug Power is a key player in the hydrogen and fuel cell market. The company’s primary focus is on hydrogen fuel cell systems and the technologies that replace conventional batteries in electric vehicles.
Alliances and acquisitions have been crucial to the Plug Power success story. Partnerships with companies like Amazon and Walmart have improved its reach and recognition, as well as its role in the hydrogen solutions market.
On the back of strong partnerships, Plug Power has expanded its global presence, especially in places such as Europe and Asia.
Governments around the world have included hydrogen support in their respective nations’ net-zero plans, and Plug Power has since completed the deployment of 13 hydrogen refueling stations (HRSs) across Europe over the last two years.
The company is on its way to building a profitable market for hydrogen fuel cell technology, selling and installing over 69,000 fuel cell systems and developing more than 250 fueling stations, catapulting Plug Power into a global leader in the hydrogen fuel space.
Aside from hydrogen fuel cell systems, the company’s thoroughly equipped Gigafactory is poised to produce electrolyzers and fuel cells.
Down the road, plans include several green hydrogen production plants with plans for commercialization by 2028. It has over 95 MW of Plug electrolyzer systems in operation or commissioned for future setup at sites across the world, setting a new PEM electrolyzer capacity milestone in the hydrogen industry.
What Is Holding Plug Power Back?
Plug Power has not had a profitable quarter since its inception and is only expected to start turning a profit near-term. In fact a 5-year analyst projection consensus doesn’t show a rising net income.
In the short term, the company risks further operating losses as investments are made in current production and management capacity, future hydrogen plant construction, and new product and service development.
Investors aren’t convinced that good news is on the horizon, as evidenced by the 70% year-over-year free-fall experienced between FY2023 and FY2024.
Following the share price pullback, analysts’ consensus estimate of $4.03 per share sits well above the current share price and offers new investors a high reward, high risk proposition. The risk primarily stems from the rapid burning of cash and lack of profitability, alongside weak gross margins.
FuelCell Energy
FuelCell Energy’s core technological competency has been fuel cells but its business success has stemmed in no small part from partnerships.
Through collaborations, like those with ExxonMobil and government contracts, the company has cemented its market standing and penetrated the market deeper, contributing to its hydrogen solution plans.
These alliances are mostly based on carbon capture and hydrogen production and, most importantly, open up new markets and customers. Management plans include solid oxide and further commercializing its products.
High Risk High Reward Fuel Cell Play
Market trends seem quite favorable, and the company is in a good spot to benefit from the shift away from fossil fuels but operational weaknesses mean the stock is likely to remain under pressure.
In fact, FCEL has already slumped around 60% in 2024. But analysts are still optimistic about its surge potential, and predict a price jump of more than 110% by the end of Q3 2025.
The stock currently trades at 2.9x sales, which is much higher than the hydrogen industry average, but still lower than than the past 5-year average.
The downside is sales are supposed to fall this year, if analysts are right in their projections. That won’t help the bottom line but growth forecasts for the top line are expect to bounce back to an annualized 35% over the next 5 years.
Nikola
Nikola seems to be back on the right track after cleaning up its muddied reputation and now is concentrated on creating hydrogen fuel cells and battery electric vehicles.
Management has ambitious goals to push its hydrogen fuel cell trucks, like the Nikola Tre, and has aims to make waves in the trucking industry, such as with long-range and zero-emission solutions. Plus, there’s the battery-electric truck segment, in which the Nikola Tre BEV (Battery Electric Vehicle) is one of Nikola’s key models.
Like FuelCell, partnerships are foundational to success, and Nikola’s collaboration with Bosch is set to boost development. These types of partnerships are important for technological advancement and production capacity.
The leadership team is also targeting new markets for hydrogen and electric truck production and distribution, while simultaneously working on the growing demand for eco-friendly means of transport. Management is aiming to establish a network of up to nine refueling stations by mid-2024 for a total of 14 refueling stations by the end of Q4.
With all that said, the company’s deteriorating financial position is a concern. In 2023, Nikola reported revenue of $35.84 million, a 28% year-over-year decline. The top line again slipped significantly to $7.50 million in Q1 2024 in January, and Nikola was served with a delisting warning due to a violation of NASDAQ’s listing requirements.
In response, Nikola Corp announced a 1-for-30 reverse stock split in June to maintain compliance with the listing rules. The move caused NKLA shares to fall to a record low.
What It Means?
To add to these financial woes, Nikola is up against many well-established giants in an increasingly competitive hydrogen and battery electric vehicle industry.
Although the company has struggled to realize the kind of growth it envisioned, its competitors in the electric trucking space appear to be going from strength to strength.
It remains to be seen if Nikola will achieve its 2024 targets and be a winning stock in the long-term. Given the increasing shift to BEVs, NKLA analysts see a staggering upside potential of about 190%.
Though NKLA stock is currently trading at 3.56 times forward sales, substantially higher than its industry peers, 5 out of 7 analysts rate Nikola stock a Hold for now.
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