Plug Power (PLUG), a leading maker of hydrogen fuel cells, is trying to rebound as momentum in renewable energy lifts shares. Is PLUG stock a buy right now?
Latham, N.Y.-based Plug Power supplies hydrogen fuel cells mainly for forklifts in large warehouses. Its fuel cells replace conventional batteries in equipment and vehicles powered by electricity. Plug Power clients include retail giants Amazon (AMZN), Walmart (WMT), Nike (NKE) and Home Depot (HD). PLUG stock went public in 2002.
The company aims to produce more than half of its hydrogen energy from entirely renewable sources by 2024. It also aims to branch out from forklifts to heavy-duty vehicles to serve ports in the U.S. and Europe, as well as stationary fuel cells to power data centers and distribution hubs.
Plug Power stands to benefit from a trillion-dollar infrastructure bill that is headed for a vote in the House on Sept. 27. The package includes $8 billion for hydrogen projects.
On Dec. 15, Plug Power announced an agreement with South Korea’s Edison Motors to develop and market a hydrogen fuel cell-powered electric city bus in 2022. The buses will use Plug Power’s ProGen fuel-cell system. The buses will be mass produced and distributed in South Korea by the first half of 2023.
Plug Power’s Partnerships
On Dec. 14, Plug Power announced it will provide Certarus with up to 10 tons of green hydrogen per day to Certarus. Initial deliveries expected in Q1 2022.
Certarus’ integrated logistics platform and fleet of compressed gas delivery trailers will move hydrogen directly from production locations to Plug Power’s and Certarus’ end users.
End users include leading mining, power generation, natural gas mid-stream and industrial energy users.
Plug is expanding its reach in Europe. On Nov. 30, Plug and Spanish energy firm Acciona Energia finalized their 50-50 joint-venture. Incorporated as AccionaPlug, the joint-venture is headquartered in Madrid and will develop, operate, and maintain green hydrogen projects throughout Spain and Portugal.
On July 14, Plug Power announced it was partnering with Charlottesville, Va.-based Apex Clean Energy in a 345 MW wind power purchase agreement and a development plan to open a green hydrogen production facility. Terms of the deal were not disclosed. Shares fell 5% following the announcement.
On June 3, Plug and French carmaker Renault said their Hyvia joint venture to make hydrogen-powered vans was under way. The partnership plans to begin building three types of fuel-cell vans at existing Renault plants in France by the end of this year. The three models will be based on the Renault Master platform of vans and use the same electric motors that now power the all-electric version of the Master.
The project also includes the installation of hydrogen charging stations across Europe, supply of carbon-free hydrogen as well as maintenance and management of fleets.
In April, oilfield supplier Baker Hughes (BHI) joined Plug Power and Chart Industries to establish a private fund that provides capital for large-scale, clean-hydrogen infrastructure projects.
Meanwhile, on Feb. 25, South Korean conglomerate SK Group closed its $1.6 billion investment into a joint venture with Plug Power to expand hydrogen energy in Asia. The joint venture should launch this year.
The partnership will provide hydrogen fuel cell systems, hydrogen fueling stations and electrolyzers to South Korea and other Asian markets.
Airbus, HevenDrone Partnerships
On Oct. 13, Plug Power said it was teaming up with aircraft maker Airbus to look into the feasibility of a hydrogen-powered airplane. It also announced a plan to explore ways to deploy Plug Power’s hydrogen technology within oil refiner Phillips 66 operations. Plug stock gapped up 13% on the partnership news.
On Oct. 19, Plug announced it partnered with HevenDrone to develop hydrogen-powered drones of varying sizes capable of lifting heavy weights and flying for extended periods.
On Oct. 27, Plug and Lhyfe, a pioneer producer and supplier of renewable and ecological hydrogen, announced a partnership to develop green hydrogen generation plants throughout Europe. The initiative seeks to generate a total hydrogen capacity of 300MW by 2025, and begin development of a 1GW production site.
The agreement builds upon the working relationship already established between the two companies earlier this year.
Plug Power announced on Sept. 20 it would open a production facility in Fresno County, Calif. As the largest of its kind, the plant will produce 30 metric tons of liquid green hydrogen per day. The plant will serve the West Coast of the U.S., as well as Vancouver, B.C., in Canada. Plug expects to break ground for the project in 2023 and open the facility in 2024.
Plug announced on Sept. 14 that it’s expanding operations with a European headquarters in Germany. The 70,000-square foot facility will house an innovation center with engineering labs and technical supports, among other features. The facility is expected to open at the start of 2022.
On Aug. 10, Plug Power said it broke ground on its $84 million plant in Camden County, Georgia. The plant will produce 15 tons per day of liquid green hydrogen intended to fuel transportation applications, including material handling and fuel cell electric vehicle fleets. The plant is expected to open in 2022.
On March 30, Plug Power said it planned to open a green hydrogen production plant in south-central Pennsylvania with Brookfield Renewable Partners. PLUG stock jumped 11% on the news. Construction is slated for the first quarter of 2022. The plant is expected to be online by late 2022.
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Plug Power Earnings And Fundamental Analysis
Plug Power reported a loss of 17 cents a share in Q3, worse than views, on sales of $143.9 million, also missing views. FactSet analysts had expected a loss of 8 cents a share, vs. a loss of 5 cents a year ago. Sales were expected to grow 35% to $144.1 million.
Still, on Nov. 19, Morgan Stanley analyst Stephen Byrd raised his price target for PLUG stock to $65 from $43.
“We are significantly increasing our revenue estimates, notably in electrolyzers (+131%) & hydrogen production (+86%), driven by management commentary on growth from these businesses over the next several years,” Byrd said in a note to clients.
On Nov. 24, Egypt’s Green Hydrogen Consortium, including Fertiglobe, Orascom Construction and others, selected Plug Power to deliver 100 megawatts electrolyzer to produce green hydrogen as feedstock for up to 90,000 tons of green ammonia production.
PLUG stock has an EPS Rating of just 14, as it is not yet profitable. It has a D- Accumulation/Distribution Rating, indicating moderate selling among institutional investors.
Plug Power’s SMR Rating of C indicates that it outperforms 40% to 60% of other stocks.
The A-to-E rating identifies companies with superior sales growth, profit margins and return on equity ratios.
However, McNally cautions that cost inflation is a concern for Plug Power and the industry as a whole.
“This is a drag on profitability not just in the current results — costs grew faster than revenues — but also in the future as the company builds out new capabilities. Plug Power’s partnership model should mitigate the impact of inflation.”
Plug Power sees hydrogen prices declining meaningfully in the second half of the year, improving margins. Marsh has also hinted Plug Power was close to adding a fifth major customer, which he says could “do over $25 million” in the second half of 2021.
On July 23, Citigroup initiated coverage on Plug with a Buy rating and a price target of $35. Analyst P.J. Juvekar said Plug Power is “leading the way” in the nascent hydrogen economy, which is “at the cusp of a breakout.”
Investor Day Event
At its annual symposium on Oct. 14, Plug Power said it expects sales of $825 million to $850 million for 2022, 65% higher than 2021 and above FactSet estimates of $759.7 million.
Looking ahead to 2025, Plug sees sales of $3 billion vs. consensus of $2.2 billion. The company also said it was teaming up with Fortescue Future Industries in a 50-50 joint venture to build a gigafactory in Australia.
Additionally, it entered an agreement to buy liquified hydrogen transportation company Cryo Technologies. Crpo is a leading provider of technology, equipment and services for the transportation, storage and distribution of liquified hydrogen and other cryogenic gases.
And it confirmed plans to generate 500 tons per day of liquid green hydrogen by the end of 2025, which will include installing 13 green hydrogen plants by the end of 2025. Plug Power projected ambitious electrolyzer sales of over 100 megawatts by 2022, which will generate 50 tons per day of green hydrogen.
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PLUG Stock Technical Analysis
The stock fell a fraction to 25.90 after announcing Q2 earnings. But shares rebounded 8.8% to 28.18 on the next trading day, Aug. 9, Shares are still well below their 52-week high of 75.49 intraday on Jan. 26, 2021.
PLUG stock plunged on March 16, when the company said it was restating financial statements. Management cited accounting errors mostly related to noncash items, including how it classified some costs. Shares jumped after releasing the restated financials.
PLUG stock along with other fuel-cell peers were dragged down further in early May, after Ballard Power Systems (BLDP) missed earnings and revenue estimates and raised doubts about the sector as a whole.
McNally says the accounting error raises a red flag.
“While some may view the restatement as backwards looking and simply a matter of accounting rules, Plug Power does have future targets that Third Bridge experts have questioned,” he said in an earlier email to IBD.
Plug Power’s relative strength line is trending lower, despite positive news about partnerships.
Its RS Rating is 21 out of a possible 99. Its EPS Rating is just 13. With a Composite Rating of 26, Plug is ranked No. 21 in IBD’s alternative energy industry group.
Fund ownership currently stands at 32%. As of September 2021, 909 funds held PLUG stock, down from 932 in June.
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McNally said Plug Power is effectively dependent on two customers, which makes the company’s situation fragile. “In addition, Plug Power is not the only company in this space that has been able to raise capital, so we expect stronger competition in the years to come,” he said.
Rival FuelCell Energy (FCEL) and Ballard Power Systems and Bloom Energy (BE) are also fuel cell stocks in the alternative energy industry group.
Plug Power is making strides to diversify. On April 29, Plug Power announced a plan to integrate its ProGen fuel cell engines into BAE Systems’ electric buses. The two companies will also work on developing hydrogen and refueling infrastructure to end-customers use points.
Meanwhile, automakers General Motors (GM), Toyota (TM) and Nikola (NKLA) are eager to embrace hydrogen too.
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Is PLUG Stock A Buy Now?
JPMorgan estimates the overall market opportunity could exceed $200 billion. Plug Power is raising capital to finance an ambitious buildout plan and forging partnerships with key industry players.
But it has yet to prove that it can achieve profitability. This is perhaps due to the fact that for now it supplies fuel cells for just one vehicle — forklifts. While it has plans to manufacture hydrogen fuel cells for other industries, a wait-and-see approach is probably more prudent.
Moreover, there could be a hitch in Plug Power’s plan to build a plant in southwestern New York. On June 4, the Seneca tribe sued Genesee County Economic Development Center over plans to build an industrial park that they say infringes on their territory. Plug Power’s is slated to become the first tenant of that park.
Bottom line: Plug surged 9% to 37.54 on Oct. 28. The gain could be considered a breakout from a bottoming base starting in late June, using a 36.14 buy point. Investors could have jumped in as PLUG crossed a high of 35.50, signaling this move above the 200-day line might hold. But the stock is not a buy right now as it’s trading below both the 50- and 200-day line.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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