3 Hydrogen Stocks Wall Street Believes are Overvalued
With the increasing focus of governments worldwide on decarbonization, the hydrogen industry is expected to achieve solid growth in the near term. Nevertheless, we think it could be wise to...
With the increasing focus of governments worldwide on decarbonization, the hydrogen industry is expected to achieve solid growth in the near term. Nevertheless, we think it could be wise to avoid Hydrogen stocks, Bloom Energy (BE), Ballard Power (BLDP), and FuelCell Energy (FCEL). Wall Street analysts believe the shares of these companies are overvalued. Let’s discuss.
Considering the increasing speed of global climate change, and rising oil prices, governments worldwide have been formulating strict policy measures to transition their nations’ economies to a green-energy-based, sustainable future. In addition, the hydrogen market is expected to gain traction due to increasing demand for energy from the reopening industrial sector. According to an Emergen Research report, the global green hydrogen market is expected to grow at a 14.1% CAGR between 2021 - 2028.
However, hydrogen infrastructure requires significant initial investment and has high maintenance costs. Furthermore, a disrupted supply chain, logistical difficulties, and reduced workforce availability are also hampering the hydrogen market’s growth.
Given this backdrop, Wall Street analysts believe Bloom Energy Corporation (BE), Ballard Power Systems Inc. (BLDP), and FuelCell Energy, Inc. (FCEL) are unsafe investment bets at their current price levels. So, we think it could be wise to avoid these stocks now.
Bloom Energy Corporation (BE)
BE designs, manufactures, and sells solid-oxide fuel cell systems for on-site power generation in the United States, Japan, China, India, and Korea. Its primary mission is to make clean, reliable energy affordable for everyone in the world. BE is headquartered in Sunnyvale, Calif.
BE’s non-GAAP revenue decreased 9.3% sequentially to $207.23 million for its fiscal third quarter, ended September 30, 2021. Its non-GAAP gross profit also fell 3.2% sequentially to $39.83 million. Furthermore, its cash and cash equivalents were $121.86 million for the period ended September 30, 2021, compared to $246.95 million for the period ended December 31, 2020.
In terms of forward EV/S, BE’s 7.38x is 247.8% higher than the 2.12x industry average. And its 6.10x forward P/S is 267.6% higher than the 1.66x industry average.
Analysts expect BE’s EPS to remain negative in its fiscal year 2021. Its EPS is estimated to decline by 216% per annum for the next five years. Also, the stock has lost 15.4% in price over the past nine months to close yesterday’s trading session at $33.89.Wall Street analysts expect the stock to hit $27.64 in the near term, which indicates a potential 18.4% decline.
BE’s POWR Ratings reflect its poor prospects. It has an overall grade of D, which indicates a Sell. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an F grade for Sentiment, and a D grade for Value, Stability, and Quality. Click here to access the additional POWR Ratings for BE (Momentum and Growth). BE is ranked #75 of 90 stocks in the Industrial - Equipment industry.
Ballard Power Systems Inc. (BLDP)
Headquartered in Burnaby, Canada, BLDP designs, develops, manufactures, sells, and services proton exchange membrane fuel cell products in Canada, and markets its products in several countries worldwide.
BLDP’s total fuel-cell products and services revenue decreased 1.6% year-over-year to $25.2 million for the third quarter, ended September 30, 2021. Its net loss came in at $30.8 million compared to $11.2 million in the year-ago period. Also, its adjusted EBITDA came in at a $23.1 million loss, compared to a $7.7 million loss in the previous period.
In terms of forward EV/S, BLDP’s 37.08x is 1,646.5% higher than the 2.12x industry average. And its 49.26x forward P/S is higher than the 1.66x industry average.
Analysts expect BLDP’s EPS to remain negative in its fiscal years 2021 and 2022. Moreover, its EPS is expected to decline at a 19% rate in the current year. The stock has missed its consensus EPS estimates in three of the four quarters. And over the past six months it has lost 22% in price to close yesterday’s trading session at $17.93. Wall Street analysts expect the stock to hit $17.60 in the near term, which indicates a potential 1.8% decline.
BLDP’s POWR Ratings reflect its poor prospects. The stock has an overall F grade, equating to a Strong Sell in our proprietary rating system. In addition, it has an F grade for Value, Stability, Sentiment, and Quality, and a D grade for Growth.
FuelCell Energy, Inc. (FCEL)
FCEL and its subsidiaries design, manufacture, and service ultra-clean, efficient, and reliable fuel cell power plants. The Danbury, Conn., company operates primarily in the USA, South Korea, England, Germany, and Switzerland.
On November 2, 2021, FCEL and ExxonMobil extended their Joint-Development Agreement for Carbon Capture Technology. However, this collaboration might be affected by the company’s weak financials.
FCEL’s long-term restricted cash and cash equivalents came in at $15.24 million for the period ended July 31, 2021, compared to $32.95 million for the period ended October 31, 2020. Its long-term inventories were $4.59 million, compared to $8.99 for the same period. And its net intangible assets were $18.99 million, versus $19.97 million, also for the same period.
In terms of forward EV/Sales, FCEL’s 47.46x is 2,135.4% higher than the 2.12x industry average. Also, its 48.79x forward P/S is 2,840.6% higher than the 1.66x industry average.
Analysts expect FCEL’s EPS to remain negative in its fiscal year 2021 and 2022. The stock missed its consensus EPS estimates in three of the four quarters. And over the past nine months, the stock has declined 56.8% in price to close yesterday’s trading session at $11.12. Wall Street analysts expect the stock to hit $7.33 in the near term, which indicates a potential 34.1% decline..
FCEL’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Stability, Value, Quality, and a D grade for Sentiment.
BE shares were trading at $34.34 per share on Friday morning, up $0.45 (+1.33%). Year-to-date, BE has gained 19.82%, versus a 25.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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