Stock Analysis & Ideas

What Do Analysts Make of Plug Power’s Walmart Deal?

Investors liked the latest news coming out of Plug Power (PLUG) HQ on Tuesday. Specifically, the hydrogen specialist said that Walmart (WMT) has agreed on an option to buy up to 20 tpd (tons per day) of liquid green hydrogen.

The retail giant will use the hydrogen to power up to 9,500 material handling lift trucks spread across its U.S. distribution and fulfillment centers. The agreement is a continuation of an already existing relationship between the companies; the two have collaborated on the use of hydrogen-powered materials handling equipment for more than a decade and the agreement will go some way toward assisting Walmart meet its target of zero emissions by 2040.

Evercore’s James West calls the pact a “validation” of Plug’s green H2 production strategy.

“Plug Power continues to execute on its vision of a nation-wide and potentially global network of green H2 production facilities,” the analyst noted. “We expect additional, substantial, offtake agreements to be announced in the coming months which will further de-risk the company’s hydrogen production strategy.”

As a result, West maintains an Outperform (i.e. Buy) rating on PLUG shares, along with a $46 price target. At current valuation, he sees a 101% one-year upside for the shares. (To watch West’s track record, click here)

With a goal of reaching 70 tons per day of green hydrogen production by the end of the year, BMO analyst Ameet Thakkar views the announcement as an “important, positive first step,” which should be followed by further off-take agreements of the company’s green hydrogen production.

The analyst thinks the deal might be an “early trial run” and sees the potential for Walmart to expand its green hydrogen supply with PLUG in the future.

However, before getting properly bullish, Thakkar thinks additional investigation of what the deal entails is required.

“Walmart’s agreement is positive,” said the analyst, “but we are curious about what sort of pricing mechanics (index vs fixed) and other contractual terms that will allow investors to get more confidence around potential for PLUG to achieve its target 30% gross margins in fuel supply agreements such as this.”

As such, Thakkar sticks with a Market Perform (i.e. Hold) rating, backed by a $33 price target. Nevertheless, should that figure be met, investors are looking at one-year returns of 44%. (To watch Thakkar’s track record, click here)

What does the rest of the Street make of PLUG’s prospects? 2 other analysts join Thakkar on the sidelines, but 7 others line up next to West, making the consensus view a Moderate Buy. The average price target sits somewhere between the two analysts’ projections; at $39.09, the figure represents 12-month gains of ~71%. (See PLUG stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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