Share analysis by Jörg Weber, ECOreporter

The great excitement surrounding hydrogen seems to be over for the time being: Most H₂ shares have been on a downward trend for some time. This seems paradoxical, as climate change is accelerating and time is running out to slow it down. This makes a consistent energy transition all the more necessary, and that includes the hydrogen sector. However, energy policy is currently running with the handbrake on when it comes to renewable energies. Meanwhile, the companies that earn their money with fossil fuels are securing their sinecures.

Hydrogen produced in an environmentally friendly way still has enormous potential when it comes to making industrial processes climate-neutral. Low-emission steel cooking is just as possible with it as the production of fertilizers or the decarbonization of transport. Although the latter applies less to cars, it applies all the more to the heavy goods transport sector, i.e. trucks, trains and ships. But there are problems everywhere. Even at steel producer Thyssenkrupp, which advertises: “We also only cook with hydrogen.” However, less and less steel is currently being produced in the Ruhr region, and Thyssenkrupp is facing a huge wave of redundancies. This will also slow down efforts to produce green steel using hydrogen.

It remains exciting

The political hydrogen targets are – still – ambitious, and the corresponding budgets are large: The German government wants to invest 9 billion euros with its National Hydrogen Strategy, and Germany is set to become number one in the world hydrogen industry. The EU and the USA are also planning to invest billions in green hydrogen. However, it is uncertain whether the plans will be realized, as changes of government and changes in the entire political landscape can lead to a U-turn. Donald Trump is planning huge tax breaks for companies, while Germany has been discussing its budget for months – both of which could lead to start-up funding for green hydrogen industries being cut.

The excitement surrounding the potential energy source of the future has cooled considerably in recent years. Growth stocks, which include H₂ shares, have a hard time in turbulent times like these anyway because they find it more difficult to obtain loans – and at worse conditions. Professional investors in particular often look for established and supposedly safer stocks. Especially as the real H₂ revolution is still a long time coming; demand remains weak and most companies are presenting fluctuating figures. As a result, some shares have lost more than 90 percent of their value since the great hydrogen buzz in 2021.

Investors often think they can only make one mistake with a technology that seems to be on the verge of a breakthrough: not jumping on the bandwagon. In the past, however, it has often been shown that selecting the right securities is particularly important when it comes to future technologies. It is impossible to reliably predict which companies will ultimately be among the winners in the hydrogen market. Shares in companies that are exclusively active in the hydrogen economy are often more of a bet than a strategic investment. An exception in the sector are companies that also focus on hydrogen, but not exclusively. There are established and profitable examples of this. Two of them are presented here first: Linde and Air Liquide.

Linde

Linde, the world’s largest industrial gases group, also did good business in 2024. On the stock market, the international group has mostly been on the up for years. In the third quarter of 2024, Linde increased its turnover by two percent year-on-year to USD 8.4 billion. Net profit remained stable at just under 1.6 billion dollars. A higher profit was prevented by the Group’s current cost-cutting measures, which, together with other extraordinary expenses, resulted in one-off costs in the last quarter. “As expected, the weak economic development continued in the third quarter, especially in the industrial end markets,” said Linde CEO Sanjiv Lamba. “We do not currently expect the economic environment to improve in the short term. However, we have taken measures to mitigate the economic headwinds.”

Linde has slightly lowered its forecast for the full year 2024: Earnings per share adjusted for special items are now expected to be between USD 15.40 and USD 15.50, eight to nine percent higher than in the previous year. Linde shares can still be considered an attractive investment. The Group has an excellent market position, is very well financed and generates robust profits even in downturns. However, the expected price/earnings ratio of 32 for 2024 remains high, and is only slightly more moderate at 28 for 2025. Investors who are currently planning to enter the market may need a lot of patience. Defensive investors should wait for a price setback before buying.

Linde is an ECOreporter favorite share and, according to its own information, the world’s largest hydrogen producer. Linde is continuously expanding this segment. The Group has initiated sustainable hydrogen projects on several continents. At the beginning of 2024, Linde announced a project in Eemshaven, the Netherlands, in cooperation with the Norwegian natural gas group Equinor. Linde will increase the quarterly dividend by nine percent to USD 1.39 (EUR 1.29) per share. This will be the 31st consecutive year of dividend increases.

Air Liquide

French Linde competitor Air Liquide is also involved in numerous green hydrogen projects, for example in its home country and in Shanghai, China. At the beginning of 2024, Air Liquide announced a joint venture with the oil company Total to build more than 100 hydrogen refueling stations in Europe over the next ten years. Around 20 stations in France, the Netherlands, Belgium, Luxembourg and Germany are to be put into operation as early as 2024.

The Air Liquide share price has performed well over the last five years. The share reached a high of almost EUR 180 in May 2024, falling to below EUR 160 by the end of November. The expected price/earnings ratio for 2024 is 27. Air Liquide is in a robust position, but ECOreporter considers Linde’s sustainability targets to be more ambitious. According to an assessment by the renowned and independent Science Based Targets initiative (SBTi), the sustainability targets of both Linde and Air Liquide are compatible with the goal of global warming of no more than 1.5 degrees.

Bloom Energy – Interesting despite risks

From October to the end of November 2024, the shares of the US company Bloom Energy shot up from under EUR 10 to over EUR 26. The reason: the company was able to secure the world’s largest order for solid oxide fuel cells to date. The energy supplier American Electric Power (AEP) has ordered up to 1 gigawatt (GW) of fuel cells. They are intended to supply data centers for artificial intelligence (AI) with electricity. According to Bloom Energy, the agreement comprises an initial order of 100 megawatts (MW), with further deliveries planned starting 2025. The fuel cells are to be installed directly at the customers’ sites and supply electricity with one third lower CO₂ emissions compared to the current supply.

According to the company, Bloom Energy’s solid oxide fuel cells can run on 100 percent hydrogen or any mixture of hydrogen and natural gas. Connected together to form power plants, the technology can supply entire building complexes with electricity. Solid oxide fuel cells are therefore not necessarily a clean solution – they are only clean when they are fueled with green hydrogen. Bloom Energy itself emphasizes that the carbon footprint is already significantly better when operating with natural gas than with conventional fossil fuel power plants.

Analysts reacted enthusiastically to the news. Experts from the US investment bank Piper Sandler described the deal as “groundbreaking” for Bloom Energy. The contract could generate sales of up to USD 3 billion for the Group and at the same time open the door to further cooperation with other energy suppliers. Above all, however, the order proves that Bloom Energy is indeed capable of supplying large data centers with its technology.

Bloom Energy is one of the more interesting companies in the H₂ sector. While companies such as Ballard Power, Plug Power and Nel have not yet been able to keep their full-bodied promises, are incurring ever greater losses and are often left out of major contracts, Bloom is growing and is apparently also being considered for large projects. This year, the Group wants to be in the black operationally. In 2025, a net profit is to be achieved for the first time.

However, cautious investors should wait and see how Bloom’s business develops and whether it will actually be in the black in the foreseeable future. The rise in Bloom Energy’s share price is probably also related to the fact that the order touches on the topic of artificial intelligence.

Bloom Energy has also been building hydrogen generators (electrolyzers) since 2022. The Group generated revenue of more than USD 1 billion for the first time in 2022 and USD 1.3 billion in 2023. Bloom could reach the profit zone for the first time in the 2024 financial year.

Enapter – Risky

Things are looking worse for the Hamburg-based hydrogen company Enapter: It expects less turnover for 2024 than initially hoped. Significant revenue is expected to be postponed until next year. However, Enapter is optimistic about its medium-term prospects. Enapter is small: Turnover for the current financial year is expected to be between EUR 22 and 24 million. The company had previously expected sales of EUR 34 million. The management’s forecast for earnings before interest, taxes, depreciation and amortization (EBITDA) remains unchanged at EUR 7 to 8 million. According to Enapter, the forecast is based on a current order backlog of around EUR 50 million. Due to delays in the production of 1‑MW electrolyzers and postponements of customer projects, Enapter expects that “significant parts of sales” will not be realized until 2025.

Fig. 2: The hall in Saerbeck stands, but was never occupied by Enapter (photo from Nov. 2022)

Enapter changed its strategy in 2024. Originally, the company wanted to set up mass production in Saerbeck near Münster in Nordrhein-Westfalen. However, the plans for the Enapter Campus research and production center were abandoned at the beginning of June 2024. In future, the Group will focus on the production of stacks – the core components of an electrolyzer. The complete electrolyzers with the Enapter brand name will now be built by Wolong in China as part of a joint venture.

Enapter also wants to offer its stacks to other customers. At the end of October 2024, the company received its first order from the Dutch energy group Adsensys, which wants to build electrolyzers with Enapter technology. Adsensys is also acquiring a software license from Enapter. According to Enapter CEO Dr Jürgen Laakmann, the successor to company founder Sebastian-Justus Schmidt, the company is “very confident that further core partnerships can be concluded in 2025 and that extensive major orders in Asia, Europe and the USA can be realized.”

The prospects for Enapter shares are difficult to assess. The share has always been a bet – but according to ECOreporter, it has become much less attractive since the campus project was canceled. Enapter admits that there is currently not enough demand to set up mass production for its electrolyzers. In addition, the company is still deep in the red. It is therefore not advisable to get aboard for the time being.

SFC Energy – Small and quite solid

Fuel cell manufacturer SFC Energy from Brunnthal near Munich has increased its sales and margins in the first three quarters of 2024. The company considers itself strategically very well positioned and is raising its earnings forecast slightly. From January to September, SFC Energy generated sales of EUR 105 million, an increase of around 20 percent compared to the previous year. According to the company, it benefited in particular from the strong demand for fuel cells for industrial applications and a significant expansion of the project business.

Business grew most strongly in Asia, where turnover increased by almost 70%. Earnings before interest and taxes (EBIT) climbed by 60% year-on-year to EUR 7.2 million. Net profit increased by almost 35% to EUR 8.7 million in the first three quarters. In the third quarter, however, profit fell by 27% to EUR 2.3 million.

SFC Energy has opened its largest factory to date in Romania and acquired businesses from Ballard Power, setting the stage for further growth.

Nevertheless, the poor earnings performance in the third quarter is cause for concern. Nevertheless, SFC Energy has successfully occupied a niche with its technology. The fuel cells are primarily used for stationary power supply – either when there is no access to the power grid or as a replacement for diesel emergency generators. SFC has achieved what many other hydrogen companies are far from: The company is making a profit.

The expected price/earnings ratio of the SFC Energy share remains high at 27 for 2024 and could be a moderate 18 in 2025 thanks to the prospect of further increases in profits. And that would be an astonishingly low value for a growth sector. Despite the business successes, however, the SFC Energy share has also suffered from the correction on the hydrogen market in the last three years, and the price has fluctuated strongly since 2021. The share is only an option for investors with a heightened risk awareness. It is not suitable for defensive investors.

Fig. 3: At the new headquarters of the international supplier of electrolysis technology Thyssenkrupp Nucera in Dortmund, 560 new jobs will be created

Thyssenkrupp Nucera on the decline

The Dortmund-based hydrogen company Thyssenkrupp Nucera is a giant compared to SFC Energy: In the third quarter of its 2023/2024 financial year alone (April to June), it generated sales of over a quarter of a billion euros – more than expected. However, earnings before interest and taxes (EBIT) fell from EUR 7 million in the previous year to just EUR 1 million. Overall, annual turnover is likely to be between 800 and 900 million euros. Alkaline water electrolysis (AWE) is expected to generate EUR 500 to 550 million of this. According to the Group, EBIT is expected to be “in the negative mid double-digit million euro range.”

The company is suffering from delays to new projects on the customer side. Since its IPO in July 2023, the share price has fallen significantly, with the average share price falling sharply. Nucera therefore remains a high-risk investment. Sustainable investors may also be concerned about the Group’s participation in the NEOM project in Saudi Arabia. This is a futuristic city that is being built in the desert in north-western Saudi Arabia and is often criticized internationally.

Conclusion

H₂ shares remain speculative investments. The gas companies Linde and Air Liquide in particular, whose businesses are not dependent on hydrogen, offer reliable entry opportunities. Among the speculative stocks, Bloom Energy and SFC Energy are making significant progress – SFC is already in the black and Bloom Energy could achieve this in the current financial year. Nevertheless, the risks here remain high.

You should keep an eye on the shares of Thyssenkrupp Nucera and Enapter. However, these shares are currently still more of a bet than an investment. Former industry favorites such as Plug Power, Ballard Power and Nel have failed to live up to expectations, resulting in significant price falls. Here too, a bet seems less attractive at present.

Even very risk-averse investors should consider a hydrogen fund or ETF if they want to make a bet on hydrogen in order to at least diversify their investment somewhat. And the following applies to all H₂ stocks except Linde and Air Liquide: Only invest money in the H₂ market that you can fully afford to lose. The unexpected can happen at any time – and you have to be able to cope with losses if you invest here.

The author of this article is Jörg Weber, founder and editor-in-chief of ECOreporter.de. The internet publication has been reporting exclusively on sustainable investments for 25 years. ECOreporter is financed by subscriptions from readers and is therefore independent of advertising revenue and the like. ECOreporter tests sustainable funds, ETFs, banks, bonds, participation rights and others and analyzes sustainable shares. Specific advice and warnings show readers where they can invest their money wisely.

When investing in shares, every investor should always be aware of their own risk assessment and think about spreading the risk sensibly. This analysis does not constitute a recommendation to buy.