Fuel-cell stocks have generated exponential gains for investors in the last five years. For example, shares of companies such as Plug Power (PLUG) and Ballard Power (BLDP) have returned 1,840% and 366% respectively to shareholders since February 2017. Comparatively, the S&P 500 Index has returned “just” 107% in this period.

Hydrogen fuel cell stocks remain a top long-term bet given the total addressable market is forecast to expand to $16.5 billion in 2025, up from $3.85 billion in 2021, indicating an annual growth rate of 43.8%. In addition to automobiles, hydrogen fuel cells are used in a wide range of applications that include buildings, electronic devices, and backup power systems.

Today I’ll analyze both Plug Power and Ballard Power to determine which is a better stock to buy at current prices.

Ballard Power

Despite stellar returns, Ballard Power stock is down 78% from record highs, valuing the company at a market cap of $2.76 billion. The company reported sales of $104 million in 2020 and the top-line is forecast to remain flat in 2021 as well. However, analysts expect revenue of $145 million in 2022.

One of the fastest-growing companies in Canada, Ballard Power manufactures and sells proton exchange membrane or PEM fuel cell products. It also offers material handling and engineering services.

Ballard Power’s business model has significant leverage and resiliency as it deploys the same core competencies and fuel cell technology across verticals such as bus, truck, rail, marine, across regional markets such as Europe, North America, and China.

It focused on market segments where the value proposition for fuel cells is robust and barriers to refueling infrastructure are the lowest. Last October, the company announced it's PEM fuel cell tech has powered over 100 million kilometers to date.

Plug Power

One of the largest players in the hydrogen fuel cell segment is Plug Power, valued at a market cap of $12.2 billion. The stock is also down 71% from all-time highs and might be a top contrarian buy right now.

While electric cars have continued to grab headlines, most forms of alternative energy including hydrogen fuel cells are flying under the radar. EV giant Tesla delivered close to a million battery-powered cars in 2021, but less than 10,000 fuel cell electric vehicles were shipped in 2020.

While fuel cell EVs might take more than a decade to gain traction, the technology has received wide acceptance across industrial applications. For example, Plug Power has partnered with Orascom to build a project where the two companies will develop nitrogen fertilizer for the latter’s subsidiary. Plug Power was also selected to develop a green hydrogen power plant in New York which will be the largest in North America.

In 2021, Plug Power signed agreements with South Korea’s SK Group and Europe’s automobile giant Renault.

The verdict

The two companies are part of a capital-intensive industry and will burn massive amounts of cash to turn profitable. Yet, they both have the cash to do so, as Plug Power and Ballard Power ended the most recent quarters with a cash balance of $3.4 billion and $1.2 billion.

Both companies could be a good buy for those with a long-term investment horizon as well as a high-risk appetite. However, In my opinion Ballard Power is currently the better investment.  That’s because the consensus price target estimates, Plug Power is estimated to double in the next year, which is impressive, but Ballard Power is trading at a discount of 150%.

PLUG shares were trading at $21.77 per share on Monday morning, up $0.48 (+2.25%). Year-to-date, PLUG has declined -22.88%, versus a -7.63% rise in the benchmark S&P 500 index during the same period.

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.

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