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Plug Power: Early Leader in a Growing Industry
Stock Analysis & Ideas

Plug Power: Early Leader in a Growing Industry

Plug Power (PLUG) is an electrical equipment manufacturing company that was formed in 1997. The company is headquartered in New York, USA. Plug Power designs and manufactures hydrogen fuel cell systems for the equipment and vehicles that are powered by electricity.

The company is focused on replacing conventional batteries and offers more advanced options to its customer base. Its solutions are also focused on fuel-cell battery hybrid technologies, processing technologies, and generation. Its storage and dispensing infrastructure also allow it to expand its services and products. Plug Power has partnered with several renowned companies, such as Walmart, Home Depot, and Amazon.

I am bullish on Plug Power because it has a strong competitive position in a high-growth industry that gives it a promising long-term growth runway, Wall Street analysts are overwhelmingly bullish on the stock, and the average price target implies tremendous upside over the next year.

Strengths

Since the utilization of hydrogen is eliminating the use of fossil fuels and, as a result, helping in carbon emissions reduction, the company often finds the governmental support that most of its competitors working in the same industry don’t receive.

The company also receives high praise for its flawless go-to-market strategies and a strong distribution network. Since bringing automation of processes into the mix, the company has also proven to be consistent with its products. The automation also allows the company the freedom to scale up or down – depending on the external factors.

Its long list of reliable suppliers, successful track record of acquisitions and mergers, and high level of customer satisfaction also give it a superior competitive advantage. Plug Power, with its experience in entering new markets and expanding, has built high hopes for the future.

Recent Results

In Q3 of 2021, which ended in September 2021, the company’s net revenue reached $143.9 million, taking the total for nine months to $340.4 million. Additionally, the total cost of revenue for the quarter was $175 million. The gross loss for the quarter went from -$28.6 million in Q3 of 2020 to -$31.1 million in Q3 of 2021. The operating loss also increased, with the total reaching $98.7 million. In Q3 of 2020, this number was at $54.3 million. Cash and cash equivalents for the most recent quarter reached $3.37 billion.

Valuation Metrics

PLUG stock is very difficult to value given that it is not generating any profits and has high growth potential. It currently trades at a forward enterprise-value-to-sales ratio of 12.5x.

Meanwhile, revenue is expected to grow by 79.9% in 2022 after soaring by 597.4% in 2021. As a result, if PLUG can sustain its rapid growth rate and scale towards profitability, it could generate phenomenal returns for shareholders.

Wall Street’s Take

According to Wall Street analysts, PLUG earns a Strong Buy consensus rating based on 12 Buys and three Holds assigned in the past three months. Additionally, the average Plug Power price target of $47.80 puts the upside potential at 122%.

Summary and Conclusions

PLUG stock has established itself as an early leader in a high-upside and rapidly-growing industry. The company is enjoying substantial growth momentum as a result. Additionally, Wall Street analysts are overwhelmingly bullish on the stock, and the average price target implies substantial upside over the next year.

On top of that, the forward enterprise-value-to-sales ratio is low enough that if the company continues to grow rapidly, the company could generate fantastic total returns for shareholders over the long term. As a result, it looks like it might be an opportunistic time to add shares.

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