JPMorgan likes these stocks to play the clean energy revolution in the transportation sector

Published Sat, Dec 18 20218:15 AM EST

Clean energy stocks have had a punishing year across the board as supply chain issues, high valuations and political uncertainty weighed on the sector. But JPMorgan believes 2022 will be a different story for some areas of the clean energy universe — specifically names exposed to the future of transportation and fuel transformation. "We think the fundamental backdrop is more favorable as we look into 2022," the firm said Friday in a note to clients. "Our improving sector outlook is reinforced by rapidly growing interest in hydrogen, low-/zero-emission vehicles, and charging infrastructure given global urgency around decarbonization, favorable subsidy environments, and improving economics," the firm added. The firm believes that some of the supply chain problems that have plagued every corner of the market in 2021 will abate by the second half of 2022. Additionally, momentum behind ESG investing should provide another tailwind for companies focused on the energy transition. One of JPMorgan's top picks in the space is Plug Power . Analysts led by Bill Peterson said that the company is executing well on its hydrogen strategy, which includes electrolyzers and green hydrogen production. Additionally, the firm pointed to expansion opportunities for the company's fuel cell division. The firm said that the hydrogen ecosystem is "inflecting in 2022," and is positioned for long-term growth. "[Plug Power] has the capital with which to scale up PEM [proton exchange membrane] based technology production very rapidly and deploy a network of hydrogen production and fueling systems, building on a first-mover advantage," the firm said in a Nov. 10 note to clients. JPMorgan has an overweight rating and $52 target on the stock, which is 75% above where shares closed on Thursday. While JPMorgan is bullish on hydrogen's long-term opportunity, Peterson was quick to note that it won't be a straight path forward. "The hydrogen ecosystem has a long road ahead and in some ways reminds us of the solar industry from 10-15 years ago before maturing throughout the last decade," he said. Another name the firm favors is Blade Air Mobility given the company's position as a category creator in urban air mobility. "We anticipate 2022 being a year where investors will become more interested in the Urban Air Mobility (UAM) theme ahead of electric vertical takeoff and landing (eVTOL) adoption," JPMorgan said. The firm added that Blade is a way to play the broad eVTOL theme, without having to bet on one specific name, which can increase risk. The firm has an overweight rating and $16 target on the stock, which is 81% above where shares closed on Thursday. While Plug Power and Blade are JPMorgan's top picks, the firm also pointed to Hyzon and EVgo as ways to play the future of mobility, and rates each name at overweight. - CNBC's Michael Bloom contributed reporting.

Plug Power hydrogen production facility.

Source: Plug Power

Clean energy stocks have had a punishing year across the board as supply chain issues, high valuations and political uncertainty weighed on the sector.

But JPMorgan believes 2022 will be a different story for some areas of the clean energy universe — specifically names exposed to the future of transportation and fuel transformation.