Keep an eye on hydrogen stocks to buy on the dip.
For one, according to Energy Secretary Jennifer Granholm, as noted by E&E News, the “Treasury Department would come out with a final rule shortly referring to guidance for companies to obtain new hydrogen tax credits under the Inflation Reduction Act.”
Two, the hydrogen industry is arguing that the current tax credits don’t offer enough flexibility. In fact, according to American Air Liquide chairman and CEO, Mike Graff, “In order to get these things [the $ billion hydrogen hub programs] off the ground, we need more flexibility,” as quoted by Bloomberg Law.
Three, “The credit was crafted and signed into law with the express intent of reducing greenhouse gas emissions and supporting American industry through the scaling up of domestic hydrogen production. Producers warn, however, that its implementation could very well be derailed by counterproductive rulemaking,” says Chamber Business News.
If the U.S. is serious about hydrogen production to help reduce greenhouse emissions, they’ll take the industry warnings seriously. From here, should the Administration make the demanded changes, hydrogen stocks could soar. Believing it could happen, here are three of the top hydrogen stocks to buy on the dip.
Air Products and Chemicals (APD)
Just weeks ago, Air Products and Chemicals (NYSE:APD) gapped lower on disappointing earnings and guidance. However, after bottoming out at around $210, it’s slowly starting to pivot higher. Last trading at $234.68, I’d like to see the dividend-paying giant retest $270 near term. Even better, it looks like most of the earnings-induced negativity has been priced into the stock.
In addition, the stock has an attractive valuation with a low price-to-earnings ratio of 18. That’s well below its five-year average by about 30%, with a yield of 3% at the moment. With a low valuation, and its role as a leader in the hydrogen space, I’d buy and hold APD.
Helping, analysts at Citi just raised their price target on APD to $285 from $260 with a buy rating. Wolfe Research has an outperform rating on the stock. Bank of America also says APD is a buy with a price target of $272 a share.
Linde (LIN)
After testing a high of $471, Linde (NASDAQ:LIN) pulled back to $444.32, where it’s now technically oversold. Even RSI, MACD, and Williams’ %R are deeply over-extended in oversold territory, telling us a bounce may be nearing. Better, if you pull up a two-year chart of LIN, you’ll see it caught support at its 50-day moving average. Furthernore, since early 2023, it’s historically bounced after testing that moving average.
Plus, Linde was just upgraded to a buy rating with a price target of $510 by analysts over at Mizuho. “They said the chemical maker is poised to outperform the market with its consistent earnings growth even as product volumes are flat,” as noted by Seeking Alpha.
Linde also just announced its subsidiary, White Martins will build, own, and operate a second electrolyzer to produce hydrogen in Brazil.
“Once operational, White Martins’ new plant will supply green hydrogen to glass manufacturer Cebrace to reduce emissions from their glass melting furnaces in Jacareí. It will also meet demand for competitive green hydrogen from existing and new customers across industrial sectors including metals, food and chemicals, among others. The new plant is expected to start up in 2025,” added Linde’s press release.
Global X Hydrogen ETF (HYDR)
I also like the dip in Global X Hydrogen ETF (NASDAQ:HYDR). This one allows us to diversify with top hydrogen stocks to buy on the dip.
Once the hydrogen story starts to heat back up again, I’d like to see the HYDR ETF double, even triple. With an expense ratio of 0.5%, the ETF invests in stocks involved with hydrogen production, and the development and manufacturing of hydrogen fuel cells. Some of its top holdings include Bloom Energy (NYSE:BE), Plug Power (NASDAQ:PLUG), Ballard Power (NASDAQ:BLDP), ITM Power (OTCMKTS:ITMPF) and Ceres Power (OTCMKTS:CPWHF).
With a good deal of excitement in hydrogen, HYDR could easily bounce well off its current lows. Helping, Goldman Sachs and Bank of America say hydrogen could be a $12 trillion market. And, according to the International Energy Agency, global hydrogen demand will need to double from about 94Mt in 2021 to more than 180 by 2030. Moreover, Europe may need to see a six-fold increase in demand by 2050.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.