Stock Market

The 3 Most Undervalued Hydrogen Stocks to Buy in December

Hydrogen stocks might not have been the best of performers during the year. However, it’s been a year of announcement in terms of some of the biggest hydrogen projects in the world. I would say that a strong stage is being set for stellar growth in the hydrogen economy beyond the current decade. Hence, this is why we made our list of undervalued hydrogen stocks.

To put things into perspective, more than 1,000 hydrogen projects have been announced globally. Of this, at least 795 are on course for full or partial deployment by 2030. Further, these projects involve an investment of $320 billion.

It’s clear from these facts that the hydrogen economy is at an inflection point. As construction is executed in various projects, the next few years will be characterized by robust revenue growth. It’s therefore a good time to consider exposure to some of the best and attractively valued hydrogen stocks.

Let’s discuss the reasons to be bullish on these three names from the perspective of value creation.

Linde (LIN)

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Linde (NASDAQ:LIN) stock has been in an uptrend for year-to-date. I however believe that the 1.25% dividend yield stock remains attractively valued. With some ambitious hydrogen projects, Linde seems poised for healthy growth in the coming years.

As an overview, Linde is a leading industrial gases and engineering company. The company has been focusing on hydrogen projects. Linde is involved in the production, distribution and refueling of blue and green hydrogen.

Recently, Linde announced that it has increased the liquid hydrogen production capacity at Alabama to 30 tons per day of liquid hydrogen. Furthermore, the company has also proposed a $1 billion Arizona hydrogen project.

It’s worth noting that Linde has a strong balance sheet and high financial flexibility. Over the next decade, the company is targeting an investment of $50 billion in clean energy projects. I am therefore bullish on LIN stock as the hydrogen economy gets bigger in the coming years.

Air Products and Chemicals (APD)

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Air Products and Chemicals (NYSE:APD) stock is another blue-chip name that’s investing heavily in hydrogen projects. At a forward price-earnings ratio of 20.6, APD stock looks attractive and offers a dividend yield of 2.65%. It’s worth noting that the stock has been sideways in the last six months. I expect a breakout rally relatively soon.

Coming to investments, Air Products has committed $15 billion towards clean energy projects through 2027. The NEOM Green project is expected to be the world’s largest green hydrogen project. In the United States, Air Products has partnered with AES Corporation to build the largest green hydrogen facility. The company will also be building Europe’s largest blue hydrogen plant that will be commercialized by 2026.

The key point is that Air Product has some big investments in the pipeline. Furthermore, the company has high financial flexibility to execute the project on time. Big investments will translate into earnings growth and potential upside for APD stock. You can see why we put this on our list of undervalued hydrogen stocks.

Plug Power (PLUG)

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I have focused on blue-chip names among hydrogen stocks. However, investors with a high risk appetite can consider some exposure to Plug Power (NASDAQ:PLUG) stock. It’s worth noting that PLUG stock has plunged by 67% for year-to-date.

The reasons include reliance of potential hydrogen subsidies for growth. Further, financing ambitious growth plans and execution remains a question. However, if Plug Power can navigate through this headwind, the stock can be a five to 10-bagger. Therefore, some exposure makes sense at current levels of $3.9.

From a growth perspective, Plug Power expects revenue of $1.2 billion this year. The target is to achieve revenue of $6 billion and $20 billion respectively by 2027 and 2030. Of course, the target seems steep, but is not unrealistic considering the impending growth in the hydrogen economy. It however remains to be seen if Plug Power can execute the big plans. This easily earns its spot on our list of undervalued hydrogen stocks.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.