Plug Power’s Walmart Deal Is a Step in the Right Direction, Analyst Says. Why That Makes It a Buy.
Plug Power stock has gained about 4% the last 12 months.
Courtesy Plug Power
Plug Power’s recent deal with Walmart is solid validation for investors that the company’s green hydrogen investments are paying off.
“Walmart is now one of Plug’s first green hydrogen supply customers, representing solid validation for Plug’s investments and strategy to expand its green hydrogen ecosystem,” wrote B. Riley Securities analyst Christopher Souther, who rated the stock a Buy with a price target of $31, in a research note Wednesday. “We think deals like this can be key drivers of the margin improvement that management has been referencing.”
Walmart (WMT) has been a Plug Power partner since 2012, when it launched a 50-fleet fuel cell pilot. That has then expanded to a fleet of 9,500 plus, the company said. Under the most recent agreement, Plug Power (PLUG) has the option to deliver up to 20 tons a day of liquid green hydrogen to power the retail giant’s lift trucks across its distribution and fulfillment centers in the U.S.
Shares of Plug Power were down 1% in early morning trading Wednesday. The stock gained 10% Tuesday on the news and has gained about 4% the last 12 months.
Alternative energy stocks—along with broader environmental, social, and corporate governance funds—have been a hot topic among investors the past few years. Green hydrogen is produced through the electrolysis of water with electricity generated from zero-carbon sources.
Souther said deals such as the one with Walmart can be key drivers of the margin improvement that Power Plug’s management has been referencing in itseffort to achieve positive gross margins for the fueling segment.
“In our view, given the lack of margin improvement thus far, the path to profitability will be key to investor sentiment and stock price performance as Plug ramps its green hydrogen infrastructure,” he said.
He also said that Power Plug acknowledged that there are additional opportunities to expand the deal with Walmart in the future, given the retailer’s goal to achieve zero emissions across its operations globally by 2040.
“Looking at the company’s [Walmart’s] key material handling customers, all have aggressive renewable and carbon reduction targets, with Plug well positioned to be a key fuel cell and hydrogen provider,” Souther said.
Write to Logan Moore at [email protected]
