Plug power (PLUG), a leading hydrogen fuel cell manufacturer, is trying to recover as momentum in renewables lifts its stock. Is PLUG Shares a Buy Now?
Latham, NY-based Plug Power supplies hydrogen fuel cells primarily for forklift trucks in large warehouses. The fuel cells replace conventional batteries in electrically powered equipment and vehicles. Plug Power customers include retail giants Amazon (AMZN), walmart (WMT), Nike (FROM) and DIY store (HD). PLUG shares went public in 2002.
The company aims to produce more than half of its hydrogen energy from fully renewable sources by 2024. It also wants to branch from forklifts to heavy vehicles to serve ports in the US and Europe, as well as stationary fuel cells to power data centers and distribution centers.
Plug Power Partnerships
On July 14, Plug Power announced it is partnering with Charlottesville, Virginia-based Apex Clean Energy in a 345 MW wind power purchase agreement and development plan to open a green hydrogen production facility. The terms of the deal have not been disclosed. Shares fell 5% after the announcement.
The power purchased through the PPA will supply a new hydrogen production plant directly with 100% renewable energy, the companies said in a: statement. The hydrogen plant will be the first and largest wind-supplied hydrogen project in the US and the largest onshore wind-powered project in the world. Once operational, the plant is expected to produce more than 30 tons of clean liquid hydrogen per day, enough to fuel the equivalent of more than 2,000 light commercial vehicles or more than 1,000 heavy Class 8 trucks.
On June 3, Plug and French carmaker Renault said their Hyvia joint venture to make hydrogen-powered vans was underway. The partnership plans to start building three types of fuel cell vans at Renault’s existing plants in France by the end of this year. The three models will be based on the Renault Master platform of vans and use the same electric motors that now power the all-electric version of the Master.
The project also includes the installation of hydrogen charging stations across Europe, the supply of carbon-free hydrogen and the maintenance and management of vehicle fleets.
In April, oilfield supplier: Baker Hughes (BHI) joined Plug Power and Chart Industries to create a private fund that provides capital for large-scale clean hydrogen infrastructure projects.
Meanwhile, on February 25, South Korean conglomerate SK Group closed its $1.6 billion investment in a joint venture with Plug Power to expand hydrogen power in Asia. The joint venture is due to start this year.
The partnership will supply hydrogen fuel cell systems, hydrogen refueling stations and electrolyzers to South Korea and other Asian markets.
On June 10, Plug Power announced plans to build a plant in Camden County, Georgia. The plant will produce 15 tons of liquid green hydrogen per day, intended for transportation applications, including material handling and fuel cell electric vehicle fleets. Plug Power is investing $84 million in the facility, which is due to open in 2022.
On March 30, Plug Power said it planned to open a green hydrogen production plant in southern Pennsylvania with Brookfield Renewable Partners. PLUG stock rose 11% on the news. Construction is scheduled for the first quarter of 2022. The plant is expected to be online by the end of 2022.
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Plug Power Earnings and Fundamental Analysis
On May 14, Plug Power restated sales for 2020, adding $7.2 million to bring it down to $93.2 million negative. It reduced 2019 sales by about $300,000 and 2018 sales by about $400,000. In 2020, losses increased by 10 cents per share to $1.68, while losses per share remained unchanged in 2019 and losses increased by 3 cents per share in 2018.
CEO Andy Marsh said the adjustments were non-cash and had no business impact.
On June 22, Plug Power reported mixed Q1 results, after two report delays. It posted a loss of 12 cents a share versus estimates for a loss of 8 cents. It had revenue of $72 million, up 76.5% and more views.
Plug Power shipped 1,308 GenDrive units, up 58.5% from a year ago.
The company said it was impacted by the Texas freeze in February, which caused a spike in natural gas prices, pushing hydrogen prices up. Higher freight costs due to pandemic-related congestion in ports also contributed to the costs.
Plug Power sees hydrogen prices drop significantly in the second half of the year, improving margins. CEO Marsh said in an earnings call that investors should expect $115 million to $120 million in gross invoices for the second quarter, about 40% of its target revenue of $475 million per year.
Marsh also hinted that Plug Power was about to add a fifth major customer, which he said could “do more than $25 million” in the second half of 2021.
The company previously estimated gross invoices at $750 million in 2022 and $1.7 billion in 2024.
RBC Capital Markets entered coverage on June 30 with an outperform rating and a price target of 42. It cited strong growth potential in the global hydrogen market and Plug’s leading position in fuel cell materials handling. It also highlighted the opportunity to leverage expertise in other end markets, including stationary energy and transportation.
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PLUG Stock Technical Analysis
The stock rose a whopping 13% to 33.72 after the Q1 earnings announcement. Shares are still well below their 52-week high of 75.49 intraday on Jan. 26.
PLUG shares plunged on March 16, as the company said it was adjusting its financial statements. Management identified accounting errors primarily related to non-cash items, including the classification of some expenses. Shares jumped after the release of the revised financial numbers.
PLUG shares, along with other fuel cell peers, were dragged further down in early May Ballard Power Systems (BLDP) missed earnings and revenue estimates and raised doubts about the industry as a whole.
Third Bridge analyst Peter McNally says the accounting error raises a red flag.
“While some may view the reformulation as backward and simply a matter of accounting rules, Plug Power does have future goals that experts at Third Bridge have questioned,” he said in an earlier email to IBD.
Plug Power’s relative strength line is trending downward. While the RS rating is 89 out of possible 99, the EPS rating is just 13. With a Composite Rating of 39, Plug ranks 11th in IBD’s alternative energy industry group.
Fund holdings are currently at 38% as a growing number of funds are buying Plug Power stocks. In June 2021, 866 funds held PLUG shares, compared to 882 in March.
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McNally said Plug Power actually relies on two customers, making the company’s situation vulnerable. “In addition, Plug Power is not the only company in this space that has been able to raise capital, so we expect stronger competition in the coming years,” he said.
Plug Power is taking steps to diversify. On April 29, Plug Power announced a plan to integrate its ProGen fuel cell engines into BAE Systems’ electric buses. The two companies will also work on developing hydrogen and fueling infrastructure for use by end customers.
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Is PLUG Stock A Buy Now?
JPMorgan estimates that the total market opportunity could exceed $200 billion. Plug Power is raising capital to fund an ambitious build-out plan and forge partnerships with key industry players.
But it has yet to prove that it can be profitable. This may be due to the fact that for now it provides fuel cells for only one vehicle: forklifts. While it has plans to produce hydrogen fuel cells for other industries, a wait-and-see approach is probably more sensible.
In addition, there could be a glitch in Plug Power’s plan to build a factory in southwestern New York. On June 4, the Seneca tribe sued the Genesee County Economic Development Center over plans to build an industrial park they say infringes on their territory. Plug Power’s will be the first tenant of that park.
Bottom line: PLUG stock is not a buy right now, as it is not in a buy zone with no discernible patterning.
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Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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