- As with any potential investment, the question of whether you should invest in AmmPower stock begins with the unmet need the underlying company is trying to fill
- AmmPower is behind a technology that can completely eliminate carbon emissions from the more than US$200 billion ammonia industry
- With shares down by more than 90 per cent since 2020, the renewable energy stock is close to booking initial sales and turning its fortunes around
As with any potential investment, the question of whether you should invest in AmmPower stock (CSE:AMMP) begins with the unmet need the underlying company is trying to fill.
The problem: Ammonia production is unsustainable
Ammonia is an important input across a multitude of industries, representing a more than US$200 billion global market. The most important of these industries is agriculture. Without ammonia, crops would not be able to grow to their full potential and feed a growing population.
The industry’s major headwind is that legacy production methods rely on fossil fuels, such as coal and natural gas, to extract the hydrogen required to make ammonia, accounting for about 1.3 per cent of global emissions in 2021, or a footprint equivalent to the yearly emissions of South Africa.
The solution: Emissions-free or green ammonia
With global electrification and decarbonization accelerating by the day, reducing ammonia’s carbon footprint stands out as a multi-billion-dollar opportunity to propel the planet towards net-zero emissions.
This is where green ammonia comes in, which involves the extraction of hydrogen from water instead of fossil fuels, reducing emissions by approximately 80 per cent in comparison, with renewable electricity use accounting for the remaining 20 per cent, making the process completely sustainable.
The technology: AmmPower’s Independent Ammonia Making Machine
AmmPower has developed an ammonia production method that can completely eliminate carbon emissions from the industry. The solution, known as the Independent Ammonia Making Machine (IAMM), can generate 4 metric tons of ammonia per day for operating costs as low as US$200 per ton. Based on ammonia prices in February, and more than US$500 in grants per ton for renewable electricity use available through the U.S. Inflation Reduction Act, operating an IAMM is currently a profitable endeavour.
The IAMM further differentiates itself in the marketplace by offering a 2x-4x improvement in unit economics compared with competitors, as well as a modular, scalable and streamlined design that enables a 2 to 2.5-year shorter turnaround time per unit compared with industry practice.
The investment: Taking advantage of maximum pessimism
Despite making green ammonia a more appealing proposition for industry players of any size, AmmPower has failed to gain sway with investors, having yet to book any revenue, much less profits, during a time of high inflation when a strong balance sheet is one of the only things keeping stocks afloat.
After an encouraging 350 per cent run-up in late 2020 through mid-2021, the renewable energy stock has given back 98.33 per cent of its value to date, falling from an all-time high of C$1.80 per share to an all-time low of C$0.03 per share as of March 22, 2024.
This maximally pessimistic scenario makes a strong case for undervaluation because investors aren’t pricing in a key piece of publicly available information: AmmPower has generated sales prospects for more than 690 IAMM units, representing global interest across 52 countries, with near-term (6-9 months) booking potential in excess of US$30 million as of August 2023, which is more than 6x the stock’s current market capitalization of C$4.83 million.
Contrary to what its stock performance indicates, AmmPower is on the edge of a share-price re-rating catalyzed by wider market recognition of the IAMM’s value-add. And the missing element for this thesis to unfold, the company closing its first few sales, seems highly likely, given management‘s more than 200 years of experience in the ammonia industry.
If you consider yourself well-versed in the volatility of microcap stocks, especially of the pre-revenue variety, and recognize the long-term viability of AmmPower’s value proposition, you may want to perform a full due diligence process on the company while shares remain near an all-time low.
Join the discussion: Learn what other investors are saying about this renewable energy stock on the AmmPower Corp. Bullboard, and check out Stockhouse’s stock forums and message boards.
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