1 hydrogen stock I’d buy in the next stock market crash

Is hydrogen the fuel of the future? Zaven Boyrazian analyses a hydrogen stock helping to shift Europe towards net-zero emissions.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

3d illustration of many red arrows pointng on the left and a green one pointing on the right side of the image.

Image source: Getty Images

Last month, the UK Government revealed plans for a ‘Green Industrial Revolution’ which greatly benefits a particular hydrogen stock, I feel. The timeline to phase out diesel and petrol vehicles was bumped forward to 2030. This adds additional pressure to vehicle manufacturers in transitioning to ‘clean’ energy sources. This has created several investing opportunities within the space. But are electric vehicles the best option?

Batteries have some limitations

Electric-powered vehicles are becoming more common every day, with charging points popping up around the country. However, there are two distinct drawbacks to the technology.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

The first is charging times. These have definitely improved over the years, but even with rapid charging stations, it can still take up to an hour before a vehicle is ready to hit the road.

The second and more environmentally problematic issue is emissions. Electric vehicles don’t release any emissions themselves, however, the process to generate the electricity being used does.

Today, around half of the UK’s electrical power is generated from renewable energy sources. But that may be insufficient to keep up with the rapid increase in demand. Thus, reliance on gas turbines may become necessary, albeit temporarily, until additional renewable sites can be brought on-line .

Can this hydrogen stock solve these problems?

Hydrogen suffers from neither of these issues, but until recently was only sourced from fossil fuels. The extraction process isn’t particularly environmentally-friendly.

But thanks to the new patented technology by ITM Power (LSE:ITM), hydrogen can now be extracted from the most abundant material on this planet – water.

Using a process called electrolysis, water molecules are broken into their base elements, oxygen and hydrogen, with no greenhouse gas emissions.

The hydrogen stock is already collaborating with car manufacturers, including Honda, Hyundai, and Nissan. They’re working to provide a continual supply of hydrogen to new fuel stations currently being built across Europe.

It is also heavily involved with finding new applications of hydrogen within household gas supplies. And it has partnered with Shell to help build the world’s largest electrolyser in Germany.

Why am I waiting for a market crash?

ITM Power’s technology has proven itself to be viable. Combining that fact with the wide range of projects and collaborations it is engaging in makes the stock sound very promising. At least the market seems thinks so since the share price has increased by over 520% over the last 12 months!

But to me, this looks like a classic case of a runaway valuation. Today the company has a market capitalisation of over £2bn. But it remains unprofitable, and only generated £3.3m revenue last financial year.

To put that into perspective, that is a price-to-sales ratio of over 600! Perhaps one day, the hydrogen stock will be able to meet shareholder expectations, but I don’t see that happening for a long time.

Is ITM Power a hydrogen stock worth owning?

As the world transitions towards net-zero, ITM Power looks like a great business with plenty of room for expansion and many opportunities ahead.

However, I think the current valuation is simply too high with respect to the underlying financials. Therefore, I’m keeping an eye on the firm for now. Should the share price decline to a more reasonable level (perhaps if we see another stock market crash) then it may become a fine addition to my portfolio.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Zaven Boyrazian does not own shares in ITM Power. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Social media and digital online concept, woman using smartphone
Investing Articles

Apple stock: Buffett is long, Burry is short. What should I do?

Our author thinks about whether following Warren Buffet into Apple stock might be a good addition to his portfolio –…

Read more »

Close-up of British bank notes
Investing Articles

5 ‘no-brainer’ dividend shares to buy today

Is there an easy way to narrow down the list of FTSE 100 dividend shares? I try one approach, with…

Read more »

Close-up of British bank notes
Investing Articles

£5,000 to invest? 2 dividend-paying penny stocks I’d hold to 2030

I think these high-yielding penny stocks could help cushion the impact of high inflation on my returns. Here's why I'd…

Read more »

Renewable energies concept collage
Investing Articles

2 green stocks that I think are no-brainer buys for the future

Jon Smith explains two of his favourite green stocks at the moment, one for growth and the other for income…

Read more »

An airplane on a runway
Investing Articles

The Rolls-Royce Share price may be set for take-off!

After an upbeat Civil Aerospace Investor Day, here's why I think the Rolls-Royce share price could be set for take-off…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

2 beaten-down growth stocks to buy as inflation rises

Despite inflationary pressures and recession concerns, I am looking at some top growth stocks to solidify my portfolio over the…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Is the IAG share price too good to miss at current levels?

Jabran Khan delves deeper into the current state of play with the IAG share price and decides if now is…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

5 of the highest-paying income stocks compared! Which one is best for my portfolio?

Income stocks are certainly in vogue right now amid sky-high inflation. But which of these big dividend payers is the…

Read more »