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Can PLUG Stock Keep Plugging Away to Rise Higher?
Stock Analysis & Ideas

Can PLUG Stock Keep Plugging Away to Rise Higher?

Since hitting lows of around $20 per share in mid-May, Plug Power (PLUG) has been plugging back. The company’s share price currently sits at around $35 per share, and provides growth investors with plenty of reason to buy and hold at these levels.

Indeed, the fact that PLUG stock was trading at more than $75 per share during the speculative mania we saw earlier this year indicates the high level of investor interest in this renewable power player. As one of the leading hydrogen fuel cell players in the market, Plug Power offers investors a high-leverage play on zero-carbon infrastructure.

Accordingly, Biden’s aggressive plans to decarbonize the United States and become a leader in alternative energy development is an important growth driver underpinning PLUG stock. The president’s clean energy plans include a future with hydrogen fuel cells. Such explicit support is all investors needed earlier this year to bid shares up to multi-year highs.

That said, with this stock continuing to lag in recent months, many investors question whether PLUG stock really has gotten its mojo back. Let’s take a look at why this is the case, and what the outlook is for Plug Power from here. (See Plug Power stock charts on TipRanks)

Competitive Headwinds Starting to Form

Unfortunately for investors in PLUG stock, Plug Power isn’t the only game in town in the hydrogen fuel cell space. In fact, there happen to be other much larger, deep-pocketed companies investing heavily in this space. One such company happens to be General Motors (GM). In mid-June, rail supplier Wabtec (WAB) announced a partnership with GM for hydrogen fuel cell systems designed for the company’s locomotives. This deal provides some nice tailwinds for GM, but also raises questions about Plug Power’s competitiveness outside its core businesses.

Indeed, Plug Power’s business is focused on hydrogen fuel cell-powered forklifts and commercial vehicles. Perhaps locomotives were outside the company’s purview to begin with. However, this big deal that GM landed suggests the company could be a real competitive threat to Plug Power over the long-run. That is, if this business really takes off.

The question still remains whether Plug Power’s core business can see the kind of growth investors are expecting. After all, hydrogen fuel cells have been around for decades. Commercializing hydrogen fuel cells at scale and transitioning commercial fleets away from combustion engines is the difficult part. Thus, many have suggested hydrogen fuel cell production is simply a business that’s not economically feasible, and unlikely to succeed over the long-term.

Where Do Investors Go From Here?

For investors in PLUG stock, this appears to be a pure-play on clean energy at the moment, and that thesis certainly makes sense among many retail investors. Add a short volume ratio of 18% on top, and there’s a recipe for short squeeze enthusiasts to jump on board.

Who knows, maybe PLUG stock is in for another meme stock rally from here? Right now, it appears this is the hope of many speculators looking for quick money in a hot sector.

Indeed, given the relative underperformance of Plug Power via the company’s recent earnings report, there remain questions as to the viability of this company’s business model over the long-term. The company reported a larger-than-expected loss, with lower-than-expected revenue, and shipment volume increases of “only” 58%. Many analysts and investors were expecting better numbers.

However, it’s hard to ignore revenue growth of 76% year-over-year. Also, the catalysts driving this growth remain strong. Accordingly, those with a truly long-term investment time horizon may be enticed into taking a stab at putting a few shekels to work on this growth name right now.

What Analysts Are Saying About PLUG Stock

According to TipRanks’ analyst rating consensus, PLUG stock comes in as a Moderate Buy. Out of 14 analyst ratings, there are 9 Buy recommendations, 4 Hold recommendations, and 1 Sell recommendation.

As for price targets, the average Plug Power price target is $44.21. Analyst price targets range from a low of $27.00 per share to a high of $78.00 per share.

Bottom Line

Investors in PLUG stock need to have a long-term investing time horizon with this green energy play. Indeed, hydrogen fuel cell may take years or decades more to be fully built out in terms of infrastructure. That means investors looking to get in on the ground floor with such a movement have reason to consider this stock today.

That said, investors should keep the discussion around hydrogen fuel cells relative. This is a technology that has been around for a long time and has had trouble becoming commercialized. Forklifts and small commercial fleets are great, but until PLUG stock gains more traction, it’s hard to make the case that this stock is worth what the market says it’s worth right now.

Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

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