The rapid growth of green energy, and, by extension, hydrogen stocks have always seemed to be a case of if, not when. And with the recent passage of the Inflation Reduction Act, the entire hydrogen sector just got a big boost.
Specifically, the bill devotes $9.5 billion to the development of green hydrogen. And green hydrogen producers are eligible for a tax credit.
This is exciting news for investors who are already investing in hydrogen stocks or looking to buy stocks in the sector. If you’re looking to invest in the sector, here are a few hydrogen stocks that are good investments now and have strong, long-term outlooks.
| APD | Air Products & Chemicals | $273 |
| HJEN | Direxion Hydrogen ETF | $14.30 |
| PLUG | Plug Power | $11.80 |
Air Products & Chemicals (APD)
Air Products & Chemicals (NYSE:APD). is committing over $15 billion by 2027 to deliver large amounts of clean hydrogen. It also owns and operates over 100 hydrogen plants and plans to invest approximately $4 billion in a huge, green-hydrogen production facility in Texas.
APD is not a pure-play hydrogen stock, but in a market like this, that could be its greatest strength, since its revenue and earnings are constantly rising. And analysts’ mean estimates call for the firm’s earnings to rise by an average of 16% in each of the next five years.
At a time when investors are shying away from companies with a great deal of debt, APD has a debt-to-equity ratio of just 0.45%.
With a price–earnings (P/E) ratio of over 26 times, APD stock isn’t cheap. But with most analysts upbeat on the shares and their average price target of over $340 per share, investors stand to get a nice return from APD.
Plug Power (PLUG)
If you’re looking for pure-play hydrogen stocks, you’ll have to accept some risk. Most, if not all, of these companies are not profitable and may not be profitable for several years. Plug Power (NASDAQ:PLUG) is losing money, but it may be closer to the black than other hydrogen companies. In fact, some believe that it may be profitable, excluding some items, by the end of 2023.
Plug Power is developing fuel cells for three distinct sectors: e-mobility, material handling, and stationary power. And the company already has signed contracts to supply green hydrogen to blue-chip companies like Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT). Those deals will boost its top line. And if the company gets the growth that analysts expect, it may become profitable sooner rather than later.
Analysts certainly love PLUG stock. Their mean price target for the stock is $24.44 which is more than double its current price,
Direxion Hydrogen ETF (HJEN)
Picking individual stocks can be profitable. But when it comes to a sector like hydrogen, it helps to be an expert. If you’re interested in investing in hydrogen but aren’t sure how to evaluate hydrogen companies, an exchange-traded fund (ETF) may be an ideal option for you. The Direxion Hydrogen ETF (NYSEARCA:HJEN) includes both of the hydrogen stocks listed above and gives investors exposure to a total of 35 companies across “five hydrogen-related sub-themes.”
This laser focus on hydrogen is one reason that the Direxion Hydrogen ETF stands out from other clean-energy ETFs. The fund’s underlying index is the Index Hydrogen Economy Index (IH2ECO).
HJEN is a relatively new ETF, as it’s only been trading publicly since 2021. In that time, HJEN stock has sunk 42%. And with investors looking for safe stocks, it may fall further.
Nevertheless, with a P/E ratio of 8.61 times and a net expense ratio of just 0.45, investors should put this ETF on their watchlists.
On the date of publication, Chris Markoch did not have (either directly or indirectly) positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.