Hydrogen energy is often hailed as the ideal green alternative to fossil fuels because it can be produced using renewable energy like wind or solar power to produce the electricity needed for water splitting into its hydrogen and oxygen components. The extracted hydrogen is then used to power an engine and the only byproduct of the burned fuel is water. But being an ideal fuel hasn’t been enough of a motivator for companies in this sector of the energy industry over the past decade, and many of the market’s hydrogen stocks have collapsed.

Industries have been slow to adopt hydrogen energy because producing hydrogen fuel currently costs more than extracting and processing oil or natural gas, and it was more cost-effective to expand existing power grids than building new hydrogen infrastructure. Inflation and high interest rates have made hydrogen projects more expensive to finance and even less attractive.

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But as hydrogen technologies improve and the macroeconomic environment improves (including lower interest rates), savings from hydrogen use could offset these costs initials. If this happens, many hydrogen industries could recover. Fortune Business Insights estimates the hydrogen fuel cell market to grow at a compound annual growth rate (CAGR) of 30% from 2024 to 2032, while Research Nester expects the hydrogen vehicle market to grow at a CAGR by 45% from 2025 to 2037.

We should take these bullish estimates with a grain of salt, but two unloved stocks from these two sectors… Plug in the power (NASDAQ: CAP) And Nicholas (NASDAQ:NKLA) – could soar as these tailwinds manifest. Both of these stocks are volatile, but they have the potential to turn a modest $200 investment into a few thousand dollars over the next few years.

1. Plug in the power

Plug Power primarily provides hydrogen fuel cells and charging services for forklifts in warehouses and distribution centers. It has deployed more than 69,000 fuel cell systems and 250 fuel stations so far. Its main clients include Amazon And Walmartand it is the world’s largest buyer of liquid hydrogen.

Plug Power’s revenue grew 40% in 2022 and 27% in 2023. Most of this growth was driven by two major acquisitions that expanded its cryogenic equipment unit and offset slower growth of its core hydrogen fuel cell business – which has struggled due to macroeconomic headwinds. has dampened the market’s appetite for expensive new hydrogen projects. Its net losses also widened over the two years as it incorporated these acquisitions.

But from 2023 to 2026, analysts expect Plug’s revenue to grow at a CAGR of 25% as its net losses are reduced. The U.S. Department of Energy (DOE) also recently provided it with a new $1.66 billion loan to build up to six new green hydrogen power generation facilities.

With an enterprise value of $2.67 billion, Plug’s stock appears undervalued, at 2.3 times next year’s sales. It’s always a highly speculative actionbut it could recover again as more companies upgrade their logistics networks with its hydrogen charging systems. Its insiders have also bought nearly five times as many shares as they sold over the past 12 months, and Norway’s Norges Bank recently increased its stake in the company to almost 8%.

2. Nicholas

Nikola produces electric semi-trailers. It initially sold battery-powered electric trucks (BEVs), but it began delivering its first hydrogen fuel cell electric trucks (FCEVs) this year. It got off to a rocky start after its public debut in 2020: it largely missed its initial delivery targets, its founder Trevor Milton was convicted of securities and wire fraud in 2022, and a series of battery fires in 2023 forced it to recall all its BEVs. . It’s also not profitable, it has almost quadrupled its share count over the past three years to raise more cash, and it faces stiff competition from Daimler truck And Tesla in the emerging market for electric semi-trailers.

But amidst all these challenges, a few green shoots are appearing. Its BEV sales are still on hold while it resolves its battery issues, but it delivered 203 FCEVs in the first nine months of 2024. It plans to deliver 300 to 350 FCEVs for the full year, and analysts expect expect its revenue to more than triple to $112. million. For 2025, they expect Nikola’s revenue to nearly triple to $328 million as it ramps up its FCEV shipments and restarts its BEV business. Nikola also aims to build a network of 60 hydrogen charging stations across the United States with its partner Voltera by 2026.

With an enterprise value of $338 million, Nikola shares look very cheap, at around 1x next year’s sales. Its insiders have also bought 15 times more shares than they sold in the last 12 months – so this could be a tempting bet on the hydrogen vehicle market.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions at Amazon. The Motley Fool holds positions and recommends Amazon, Tesla and Walmart. The Motley Fool has a disclosure policy.