Rewind to a year ago and Plug Power (PLUG) was a high-flying stock. Times change fast on Wall Street, however, and now the hydrogen fuel cell maker sits 25% into the red on a year-to-date basis. Yet, could a shift in sentiment be right around the corner?
J.P. Morgan’s Paul Coster thinks so and says the company’s “dedicated leadership team and clear focus on execution across its business domains” leaves it very well-placed to be a hydrogen economy “leader.”
Looking at the near-term, Coster believes demand for the company’s core materials handling products remains “strong.” With more recent opportunities in electrolyzers and stationary power also “taking shape,” the analyst is confident PLUG can meet its respective 2021 and 2022 billings targets of $500 million and $750 million. In fact, based on strong demand, the analyst thinks that when the company hosts its Plug Power Symposium next month, there’s the possibility for “billings upside.” Although Coster notes the company might stick to its current outlook, due “COVID-induced global supply constraints.”
That said, by the end of 2023 or early 2024, Plug expects to be the U.S.’s top green liquid hydrogen producer. To source its renewable electricity at a low cost ($0.03-0.04/kWh), the company has also secured “long-term Power Purchase Agreements” with US power companies. As renewable electricity accounts for 80% of green hydrogen production’s “variable costs,” these agreements will “position the company well for low-cost hydrogen.” The economics could even get better should US Congress approve a production tax credit (PTC).
This is in addition to the scale up of electrolyzers, which the company believes are cost competitive at present, but over the next 3-4 years, based on increased scale, expects to see costs reduced by roughly 70%. The hydrogen specialist sees a “similar cost curve” for electrolyzers as for its fuel cell products, for which costs have declined by 25% for “every doubling of the installed fleet.”
Accordingly, Coster sticks to an Overweight (i.e. Buy) rating for PLUG shares, backed by a $48 price target. The implication for investors? Upside of a strong 85%. (To watch Coster’s track record, click here)
The Street’s average price target is a more modest $40.47, but still suggests very decent returns of 58% on the one-year horizon. Most analysts remain in PLUG’s corner although not all are convinced; the stock’s Moderate Buy consensus rating is based on 12 Buys, vs. 5 Holds and 1 Sell. (See PLUG stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.