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?
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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’s Partnerships
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.
The power purchased through the PPA will directly supply a new hydrogen production plant with 100% renewable power, the companies said in a statement. The hydrogen plant will be the first and largest wind-supplied hydrogen project in the U.S. and the largest onshore wind-powered project across the globe. Once operational, the plant is expected to produce over 30 metric tons per day of clean liquid hydrogen, enough to fuel the equivalent of over 2,000 light commercial vehicles or over 1,000 heavy duty class 8 trucks.
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.
Expanding Footprint
On June 10, Plug Power announced plans to build a 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. Plug Power is investing $84 million in the facility, which is 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
On May 14, Plug Power restated 2020 revenue, adding $7.2 million to bring it to negative $93.2 million. It reduced 2019 revenue by about $300,000 and 2018 revenue by about $400,000. In 2020 losses widened by 10 cents a share to $1.68, while 2019 per-share losses remained unchanged and 2018 losses widened by 3 cents a share.
CEO Andy Marsh said the adjustments were non-cash and had no impact on business operations.
On June 22, Plug Power reported mixed Q1 results, after twice delaying the report. It posted a 12-cents-a-share loss vs. estimates for an 8-cent loss. It had revenue of $72 million, up 76.5% and above views.
Plug Power shipped 1,308 GenDrive units, up 58.5% from a year ago.
The company said business was impacted by the Texas freeze in February, which caused a spike in natural gas prices causing hydrogen prices to jump. Higher freight costs due to pandemic-related congestion at ports also added to costs.
Plug Power sees hydrogen prices declining meaningfully in the second half of the year, improving margins. CEO Marsh said in an earnings call that investors should expect $115 million to $120 million of gross billings for Q2, about 40% of targeted revenue of $475 million per year.
Marsh 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.
The company previously estimated gross billings of $750 million in 2022 and $1.7 billion in 2024.
RBC Capital Markets on June 30 initiated coverage with an outperform rating and a price target of 42. It cited large growth potential in global hydrogen market and Plug’s leadership position in fuel cell material handling. It also highlighted its opportunity to leverage expertise into other end markets including stationary power and transportation.
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PLUG Stock Technical Analysis
The stock gapped up as much as 13% to 33.72 after announcing Q1 earnings. Shares are still well below their 52-week high of 75.49 intraday on Jan. 26.
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.
Third Bridge analyst Peter 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 downward. While its RS Rating is 87 out of a possible 99, its EPS Rating is just 13. With a Composite Rating of 37, Plug is ranked No. 13 in IBD’s alternative energy industry group.
Fund ownership currently stands at 38% as a growing number of funds are buying Plug Power shares. As of June 2021, 866 funds held PLUG stock, up from 882 in March.
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Growing Competition
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) is No. 7 in the group. 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 stock is not a buy right now as it is not in a buy zone with no discernible pattern forming.
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Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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