Plug Power (PLUG), the fuel cell and alternative energy producer, should be on top of the world right now. With the passage of the Inflation Reduction Act and the pile of tax credits contained therein for renewable energy purchases, it should give the company a leg up. Its earnings report didn’t prove quite so helpful, however. Plug Power is down over 3% in after-hours trading after losing 3.7% in today’s regular session.
Plug Power failed to hit both top-and bottom-line estimates in its report. The company posted a loss of $0.30 per share, which faltered against the Zacks consensus estimate, calling for a loss of just $0.21 per share. Revenue proved little better as the company posted $151.3 million against a Zacks consensus that called for $169.1 million.
The last 12 months for Plug Power shares have seen gain, loss, recovery, and a seemingly repeating pattern. Share prices were up around $27 back in August 2021, and by mid-November, staged a hefty run-up that saw price challenge $45 per share. Shares ended up down around $13 in May. Now, they’ve recovered once more to just under $24.
There are signs of life ahead for Plug Power, the Inflation Reduction Act not least among them. There are also potential signs of a further reversal to come. Thus, I’m mildly bullish. Alternative power has plenty of use cases, even in a recessionary environment.
What is Wall Street’s Price Target for PLUG Stock?
Turning to Wall Street, Plug Power has a Moderate Buy consensus rating. That’s based on 11 Buys and four Holds assigned in the past three months. The average Plug Power price target of $33.57 implies 36.08% upside potential.
Analyst price targets range from a low of $18 per share to a high of $78 per share.
Investor Sentiment Metrics Look Reasonably Sound
Investors seem to have at least some confidence in Plug Power’s ability to succeed. Currently, Plug Power has a Smart Score of 7 out of 10 on TipRanks. That’s the highest level of neutral, just one step shy of “outperform.” That implies that Plug Power has a slightly better chance of outperforming the broader market than not.
Insider trading at Plug Power, meanwhile, is overwhelmingly positive. In the last three months, there were only Buy transactions that took place at Plug Power. There were 18 of them at that, showing quite a bit of interest in Plug Power from insiders.
Going back over the last 12 months shows an even more eye-catching point. There were only six Sell transactions that took place. All of those were entirely in April. This brings the total ratio of Buy to Sell transactions to 54 to six.
That actually sounds better than it is; looking at those Buy and Sell transactions shows shallow buying and extensive selling. The average purchase amount was in the four-figure range. Only two transactions actually cleared $13,000 worth of stock purchased, and those not by much.
Meanwhile, those sales back in April? Most of the selling was in the high six-figure to the low seven-figure range. That leaves aside the sale by Martin Daniel Hull, corporate controller, who sold a comparatively meager $143,647.
What Does the Future Hold for PLUG Stock?
Here’s the best news for Plug Power: there are still plenty of sound use cases for its fuel cell and alternative energy products. To that end, Plug Power has already reaffirmed its full-year sales guidance. It’s clearly looking for bigger sales to come the farther we get in the year; in order to meet average targets after a disappointing quarter, the next quarters have to be significantly ahead.
That might seem like pie in the sky, but some are already pointing out the impact of the Inflation Reduction Act, recently passed in the United States Senate. Plug Power was recently mentioned by name as part of a list of “winners” in the act. An array of “generous tax credits in the bill” will likely help serve as a means to fuel demand.
In a recessionary environment, that’s doubly true. Tax deductions are useful; just ask any small business. Tax credits are even more valuable. The notion that small businesses—and home workers, which are still a big deal even after most of the COVID-19 restrictions have fallen away—would want a means to secure their power is perfectly reasonable.
Thus, alternative power systems that function as a backup for the main grid would get an extra close look. As far back as 2019, California residents were spotted buying backup generators to tackle power outages. Texans got involved in the process as well, especially after the unexpected cold snap in 2021.
The new tax credits will certainly help matters. With plenty of home workers still out there—an Upwork (UPWK) study figures almost one in four American workers will be working remotely by 2025—shelling out for backup power will increasingly make sense.
That, in turn, should give Plug Power a leg up on its sales, particularly over the next two quarters. Yes, a recessionary environment might turn some off from making a major household purchase like that, and certainly, the ongoing inflationary environment will put pressure on some sales as well.
However, this is somewhat different; the tax credits, the deduction possibilities, and the inescapable need for electric power will likely elevate backup power systems to a more urgent purchase. Throw in the fact that Plug Power is trading well below its average price target right now, and that opens up a potentially-solid entry point for those who want a piece of some upcoming buying.
Conclusion: Is Plug Power Stock a Buy Now?
An inflationary and recessionary environment together puts a lot of weight on retail purchases. Customers concerned about paying rent and keeping the lights on don’t tend to buy much beyond necessities. Plug Power, however, is part of a group of businesses that offer ways to keep the lights on, and that gives them a bit of edge with wary consumers. The tax issues don’t hurt matters here either. That’s why I’m bullish on Plug Power.
The company sure seems to believe it can meet its sales goals for the year despite a disappointing quarter. The circumstances currently set up look like they’ll work in Plug Power’s favor too. Only time will tell how well it all works out, but right now, Plug Power has a pretty good case, going forward.
