Energy is one of the biggest concerns as inflation continues to stay high. Oil and Natural Gas prices are still heavily inflated thanks to supply chain issues and an ongoing war in Eastern Europe.
Naturally, this is pushing the market to seek out alternative energy plays that can help America build a new energy infrastructure and help Europe break away from its dependence on Russian oil.
So now is a solid time to revisit our coverage of Plug Power (PLUG).
We've been covering Plug Power since September 2020 and we've been really excited about the company's growth potential and it's provided a HUGE amount of upside for our early audience.
But fast forward to November 2021, and our last price target came right before valuations for growth stocks got crushed by initial concerns over rising inflation + rates.
This cause a huge portion of the NASDAQ to be cut down since November 2021. This was due to a lot of factors, but the one that really concerns PLUG is that lots of growth companies were experiencing valuations much higher than normal. And for the last decade that was the "new normal".
But with what we've seen due to these concerns, valuation "normalizations" are causing growth stocks like PLUG to fall back to earth.
So some companies are going to continue this downward trend, as inflationary pressure is going to expose weaker business strategies and break bad management.
But for PLUG though, the last 5 months have been a brilliant period of growth. PLUG has announced MASSIVE new partnerships, broken ground on new plants all over the world, and shown that they are poised to be a GIGANTIC presence in green energy for the next decade.
We highlighted one major area of their partnerships push in a recent video. Check that out here:
PLUG is looking unstoppable, even in this wild era of market volatility. Will the stock be volialte for some time? Yes. But over the long run, we believe PLUG is poised to be big winners in the space.
Therefore, let's adjust our old price target to reflect this new normal for growth stocks!
Let's get into it 👇
Plug Power Overview:
As we mentioned last we wrote them up in November 2021, Plug had made progress both with their electrolyzer tech as well as their hydrogen plant planning.
And since then, they've announced plans for a green hydrogen plant in California & announced a partnership with Olin that will bring a hydrogen plant to Louisiana.
But there are also a lot of potential partnerships brewing in Europe and we'll get to that.
PLUG is also getting a lot of positive regulatory sentiment, with news that Congress is considering an investment in Hydrogen infrastructure to be a part of future spending bills.
Plug Power is known for materials handling and it's emerging electrolyzer verticals, but it's mobility sector just got a huge shot in the arm.
PLUG and Walmart:
Walmart and Plug Power recently announced a deal to expand Plug Power's role in providing hydrogen-powered forklifts to the retail titan.
Walmart has agreed to purchase up to 20 tons of liquid hydrogen per day from Plug Power. This is an important metric for PLUG as they grow because they measure hydrogen output in Tons-per-day (TPD).
Plug Power is on pace to hit their target of being able to produce 70 TPD by the end of 2022. So this Walmart deal represents a huge chunk of PLUG's capacity. Plug Power has sales agreements totaling 600 TPD.
By their own accounting, PLUG will be able to hit 500 TPD by 2025 and 1,000 TPD by 2028.
This will rely heavily on their plants in New York, California, Georgia, and Louisiana coming up to capacity on time.
The great news for PLUG though is the demand for their hydrogen is STRONG. They'll be able to monetize whatever they're producing very quickly as they expand their electrolyzer capacity. They've crushed their goal of hitting 3 pedestal customers by 2022, and are hoping to add two more in the next year.
Their focus is on those being Europe-based customers (more on that in a bit).
Originally Plug Power called for $1.5 billion of electrolyzer and hydrogen production revenue in the next 3 years. This was coupled with material handling revenue of $1 billion by 2025. That has since expanded to $3 billion in total revenue by 2025.
Production and revenue look really strong for the next few years. PLUG is really flying as it establishes this new green hydrogen ecosystem.
European Expansion:
The war in Ukraine and subsequent fallout between the EU and Russia have brought energy independence to the forefront for most businesses and policymakers in Western Europe. PLUG is committed to making hydrogen production in Europe a key focus in 2022. The stock has had a few positive runs in the last month off of comments from their CEO that they are vetting potential pedestal customers centered in EMEA.
For PLUG, they're in the right phase of development at the right time. There are several potential competitors who can push for dominance in the EMEA green hydrogen market, but only PLUG has real scale right now.
Plug Power Outlook:
PLUG continues to hit its targets and expand it's upside with every quarterly report.
That outlook really hasn't changed. All that is different now is how the market values early-stage growth plays like Plug Power.
In heavy bull runs like what we saw post-2020, its easy for valuations to get out of hand. Right now is a great opportunity to get into Plug Power if you missed some of our initial coverage of them.
Strong partnerships, scalable tech, and inflating energy costs all add up to make Plug Power a really valuable energy play for the next 5 years.
Price Target: $23 (35% Upside)
Current Price: $17
Target Date: End of Q1 2023
Rating: Overweight
Risk/Reward: Medium High/ High
Ticker: PLUG
Market Cap: $24B
Dividend Yield: 0%