The global demand for green hydrogen has been increasing in recent years because of its ability to reduce carbon emissions. Green hydrogen is a sustainable energy source produced from regenerative energy sources via water electrolysis.
According to the Allied Market Research report, the global green hydrogen market is estimated to expand from $0.3 billion in 2020 to $9.8 billion by 2028, demonstrating a CAGR of 54.7% during the analyzing period. The market's growth will be driven by the increasing awareness of green hydrogen as an energy carrier. In addition, the global intentions to reduce CO2 emissions will increase the usage of renewable and clean energy, leading to the higher use of green hydrogen fuels.
In today’s article, I am going to analyze and compare two hydrogen stocks, Ballard Power Systems Inc. (BLDP) and Bloom Energy Corporation (BE), to see which one is currently a better buy.
Founded in 1979, BLDP engages in manufacturing, selling, and servicing proton exchange membrane (PEM) fuel cell products. Based in San Jose, California, BE produces, sells, and installs solid-oxide fuel cell systems for on-site power generation in the U.S. and worldwide.
Year-to-Date (YTD), BLDP stock has dropped 13%, while BE has advanced about 2%.
Recent Developments
On March 16th, P.J. Juvekar, an analyst from Citi, updated its coverage of Ballard Power following the company's quarterly report, maintaining a "Neutral" rating. The analyst noted that management's operating expenses guidance implies 50% year-over-year growth to $140-$160 million, leading to lower year-over-year gross margins amid higher cost inflation. As a result, the firm decreased its price target on Ballard Power Systems to $11 from $13.
On February 28th, Susquehanna analyst Biju Perincheril upgraded Bloom Energy to “Positive” from “Neutral." The analyst believes Bloom Energy has a positive medium-term outlook amid higher geopolitical risks, especially in Europe and other import-dependent markets. As a result, this can lead to increased hydrogen adoption. The firm boosted its price target on BE to $33, up from $18.
Recent Quarterly Performance & Analysts Estimates
On March 14th, Ballard Power reported earnings for the fourth fiscal quarter of 2021. In Q4, the company’s total revenue rose 28.3% year-over-year to $36.7 million, beating Wall Street estimates by $10.71 million. The revenue growth was driven by a 77% YoY increase in Power Products revenue to $26.6 million, offsetting a 26% YoY decrease in Technology Solutions revenue of $10.1 million. Additionally, Ballard Power disclosed a GAAP EPS of ($0.15), missing analysts' consensus by $0.08.
The company’s fourth-quarter Adjusted EBITDA loss came in at $25.5 million compared to a loss of $14.5 million as of 4Q20.
Currently, Wall Street expects BLDP's earnings to stand in FQ1 at ($0.10) per share, compared to a year-ago value of ($0.06). However, analysts anticipate its FQ1 revenue to rise by 39.2% YoY to $24.5 million.
For its fiscal fourth quarter, ended December 31st, 2021, Bloom Energy's revenue grew 37.3% year-over-year to $342.5 million, primarily driven by higher product revenues. At the same time, product revenue growth was due to the increase in product acceptances because of expansion in existing markets and the CDG program. Notably, the company achieved record acceptances of 735 systems in 4Q21, representing a 63.3% year-over-year increase. Besides, BE managed to beat Wall Street revenue expectations by $33.56 million. In Q4, its Non-GAAP EPS stood at ($0.05), missing analysts' consensus by $0.01.
It is also important to note that Bloom Energy ended the fourth quarter with positive cash flow from operating activities of $47.2 million, compared to ($18.7) million as of 4Q20. Although BE’s Adjusted EBITDA decreased by 27% YoY, it remained positive, standing at $18.7 million.
For the first quarter, analysts expect BE's EPS to come in at ($0.12), representing a 65.86% year-over-year decrease. However, its revenue for the first quarter of 2022 should grow 12.21% YoY to $217.70 million.
Comparing Options Market Sentiment
Looking at the May 20th, 2022, option chain for both BLDP and BE, let's figure out options market sentiment by analyzing the calls/puts ratio. In BLDP's case, the open calls/open puts ratio at the $12.00 strike price comes in at 0.14x, implying a bearish options market sentiment. The open calls/open puts ratio for BE at the $24.00 strike price is 8.5x, indicating a bullish options market sentiment.
Conclusion
While both hydrogen companies should benefit from the market's growth in the long term, I think that Bloom Energy is presently a better investment based on its superior financials, favorable analyst coverage, and better open options market sentiment.
BLDP shares were trading at $11.34 per share on Thursday morning, up $0.34 (+3.09%). Year-to-date, BLDP has declined -9.71%, versus a -8.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.
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