Shares in listed hydrogen companies have seen a strong start to 2023 after struggling over the past year amid a wider downturn in technology stocks.

Stock markets have generally turned higher recently but energy storage stocks have been the best performing basket of listed companies for Danish online brokerage Saxo over the past week, according to a note published by Saxo’s head of equity strategy, Peter Garnry.

Especially strong weekly gains have been seen for hydrogen and fuel-cell firms such as Plug Power (22.7pc), Bloom Energy (14.6pc), Ballard Power Systems (20.7pc), Nel (13.9pc) and Fuelcell Energy (13.9pc), although ITM saw a fall of 1pc.

"This industry has seen quite some big orders at the beginning of the year, suggesting that 2023 could be the big breakthrough year for the industry," Garnry says.

“Share price is not necessarily indicative of industry health” Collins, Hyarc

Hydrogen shares halved over the course of 2022, following a period of substantial growth over the previous two years, in line with the impact of inflation on many technology stocks. And while weekly gains are growing, operating profit margins for Plug, Bloom, Ballard, Nel and Fuelcell remain negative. But analysts remain optimistic for hydrogen’s prospects this year.

“Share price is not necessarily indicative of industry health,” says Adam Collins, founder at consultancy Hyarc Advisors. He argues that passing on the impact of inflation to either customers or the supply chain is difficult for small, fast-growing companies in any sector—and hydrogen is no exception.

“Traditionally, growth stocks across different sectors tend to perform poorly in a rising rate environment. This is likely to change as the market anticipates the peaking of interest rates,” Collins says.

“In a number of cases, hydrogen businesses are still at the development, rather than manufacturing or production, phase,” he adds, noting that companies’ initially non-productive investments in new capacity additions will have an impact on share price in the short term.

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Author: Polly Martin