Investment Opportunities in Hydrogen Stocks: Key Picks for May 2024

TipsForTraders | May 21, 2024

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Amid current financial uncertainties, discerning investors are eyeing the hydrogen sector as a fertile ground for potential opportunities. As the market navigates through the complexities of the 45V tax credits and anticipates shifts in Federal Reserve rates, the sector presents an intriguing play for those looking to capitalize on recent downturns. Former energy secretary Ernest Moniz highlighted the potential slowdown in growth due to current tax setups, emphasizing the industry’s sensitivity to regulatory landscapes. However, significant investments, including a substantial $1.78 billion loan from the Department of Energy to Plug Power, signify a robust interest in advancing hydrogen technologies despite economic headwinds.

Linde (NASDAQ:LIN) currently appears undervalued at $432.42, showing promising signs of recovery. Technical indicators suggest that Linde is oversold, with potential for a rebound. Initial targets post-recovery point towards $440 and, with continued momentum, potentially reaching $460. Investors also benefit from a modest dividend yield of 1.3%, adding to Linde’s attractiveness. The company’s strong fundamentals have led analysts from Mizuho and BMO Capital to project price targets upwards of $500, affirming confidence in its growth trajectory.

Bloom Energy (NYSE:BE) has recently demonstrated resilience, rebounding from a support level around $9 to over $11. It briefly surpassed resistance at $12.50, touching $13.50 before settling back to $12.33. The company’s strategic focus, especially in expanding its presence in the data center market through a new partnership with Intel, positions it well to leverage the ongoing surge in demand for artificial intelligence solutions. This alignment with industry trends underscores Bloom Energy’s potential for significant growth, making its current price an attractive entry point.

Direxion Hydrogen ETF (NYSEARCA:HJEN) offers a broader investment in the hydrogen sector, encapsulating around 30 stocks focused on various aspects of hydrogen technology, from production to storage and fuel cells. After a dip to $10, the ETF showed strength by climbing to $12, now adjusting to a more accessible $11.48. This ETF not only diversifies risk but also taps into the sector’s pivotal players, including Air Liquide and Ballard Power, alongside the aforementioned Linde and Plug Power.

In conclusion, despite the financial strain from higher interest rates and uncertainty around tax incentives, the hydrogen sector remains ripe with investment opportunities. For those willing to navigate the volatilities, companies like Linde and Bloom Energy offer substantial upside potential, bolstered by strategic growth initiatives and strong market positioning. Moreover, the Direxion Hydrogen ETF provides a comprehensive way to invest in the sector’s growth, balancing individual stock risks with broader exposure. As the market conditions evolve, these hydrogen stocks and ETFs represent smart choices for investors aiming to capitalize on the energy transition towards more sustainable solutions.