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Our Industrials analyst Jay Van Sciver is hosting a special black book call to discuss the fuel cell investment landscape this Thursday, August 27th at 2PM EDT. If you are an institutional investor interested in accessing this call or related research please email sales@hedgeye.com. |
We’ve spent years listening to the stories about fuel cells, from space applications to prior UTX investor days to the NKLA frenzy. To call us skeptical would be generous – it always sounded like ‘wildly expensive power from a box filled with lava that might fail any day – the future!’.
That said, fuel cell capital costs are now on a plausible trajectory. High-end efficiencies have improved, often exceeding those of gas turbines. Real products are far along in the development cycle and tangible use cases exist. Grid reliability hasn’t improved in key markets, generation assets continue to age, and stimulus packages coming out of the COVID downturn may well incentivize environmentally conscious investments in the U.S. and, more clearly, abroad.
Fuel cell hype still dominates, however. There is no hydrogen ‘ecosystem’; expectations for competitive hydrogen fuel costs typically assume others make terrible energy investments.
There is a robust natural gas ecosystem in many geographies, but CH4 etc. doesn’t seem as ecologically attractive as H2. Subsidies vary over time and by region, with domestic and political interests distorting activity.
The fuel cell playing field is muddy.
A sample of the top half dozen publicly traded fuel cell names reflect extreme market optimism, trading at a rough $30 billion in enterprise value on ~$1 billion of sales and net losses. The short interest in several of these names is high, suggesting investor skepticism. Companies facing substitution risk, like CMI, trade near all-time highs for reasons that both elude and frustrate us.
Ambivalence dominates. Beyond the technologies, regulations, end-markets, and product strategies the investment backdrop is inconsistent and messy, but that’s also a positive setup for longer-term alpha generation.
What companies will emerge winners or consolidation targets? Which products and technologies are likely to find economically viable applications? Are there unrecognized longs, shorts? How might the regulatory landscape evolve?
What will drive customer technology selection and equipment demand? We’ll look at these and other topics in our fuel cell black book this Thursday, August 27th at 2PM EDT.
If you are an institutional investor interested in accessing this call or related research please email sales@hedgeye.com.
