It’s not a new development by any means, but there is a growing feeling the need for clean energy sources is now almost universally recognized.
For investors, there are now multiple opportunities to play this secular trend. These were fully taken advantage of in 2020’s post-covid resurgent market. New energy stocks were flavor of the year, and as a result, hydrogen fuel cell maker Plug Power (PLUG) benefitted immensely.
BTIG analyst Gregory Lewis says there is still much work to be done by Plug Power and its peers, particularly pertaining to costs and infrastructure, to make green hydrogen a “widely accepted energy source for industrial and transportation applications.”
While the company has had a much harder time in 2021’s growth-averse stock market, Lewis sees PLUG as particularly well-placed to gain market share.
“While we are still in the early innings of an energy transition away from fossil fuels (wind and solar are leading the charge), we expect momentum for green hydrogen to build this decade and next helped by an improving cost curve and government support,” the analyst said. “We view PLUG as a well-capitalized, first-mover with strategic customers and partners across the green hydrogen supply chain.”
Partnerships are key, and PLUG has made quite a few. The company’s green hydrogen production plant in Pennsylvania is expected to kick into action in 2022, and Brookfield Renewable will supply the hydroelectric power. PLUG is also collaborating with wind power producer Apex, as it intends to add ~8 new green hydrogen facilities (work has already commenced on 3 projects).
“We expect PLUG to partner with other renewable producers as it looks to establish an integrated green hydrogen network across the US,” Lewis further commented.
Considering the transportation industry consumes ~50% of the world's global oil demand and industrial applications around 7%, they are also “ripe for at least some hydrogen switching.” Until now, U.S. hydrogen infrastructure has remained “limited.” PLUG, though, with help from partners and “anchor customers” is creating a sort of "if you build it, they will come" hydrogen network for power generation and specialized transport applications.
Additionally, Europe’s big push toward achieving the Paris Agreement’s net zero emissions target has been beneficial to the company. Lewis expects this to remain so.
“We estimate that 3 customers represent ~60% of the PLUG revenue, and we like the customer concentration (each has a vested interest), as green hydrogen is still a nascent industry,” the analyst summed up.
Ok then, great for Plug Power, but what does it all mean for investors? Lewis rates PLUG shares a Buy along with a $40 price target. Investors could be pocketing gains of 30%, should the analyst’s forecast go according to plan. (To watch Lewis’ track record, click here)
According to the rest of the Street, the shares are heading higher still. There’s 56% upside projected, given the average price target stands at $48.07. Overall, the analyst consensus rates the stock a Moderate Buy, based on 10 Buys, 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.