There is much positive about the progress being made at Plug Power (PLUG). The hydrogen fuel cell specialist has a growing list of major customers, including Amazon, Home Depot, Walmart and General Motors, with a fifth name expected to be added soon.
In the past year, the company has also expanded its global reach and now has joint ventures (JVs) with South Korean SK Group, Renault and Spanish renewable energy producer Acciona.
It’s a big change, says Piper Sandler’s Pearce Hammond, which with the addition of $5.1 billion in accessible cash/limited cash/tradable securities, leaves the company “well capitalized to fund its growth initiatives.” As such, Hammond is more “comfortable with the company’s revenue trajectory”.
“We were previously cautious about PLUG’s revenue targets,” the analyst continued, “but the recent quarterly performance is well in line with our model, reinforcing our belief that the company will be able to meet these revenue targets.”
What all this means is a change in Hammond’s earnings estimates. FY21 revenue forecast is up 4% from $468 million to $488 million — ahead of PLUG’s forecast of $475 million. In addition, the revenue estimate for FY22 has increased 8% from $704 million to $762 million, also above the company’s guide for bills of $750 million.
That said, higher general and administrative costs are expected to be incurred due to PLUG’s hiring of additional staff during the recent financial adjustment and Hammond also expects an increase in R&D estimates resulting in lower operating margin estimates. The previous forecast had an operating margin of -16.5% for FY21, but this has now been changed to -24.3%.
Looking ahead, Hammond still expects operating margins to “turn from negative to positive in 2023.”
And while the analyst also believes the company is “better positioned” than Ballard Power Systems – the other hydrogen fuel cell company under its cover – the risk/reward for PLUG is now “balanced”.
Accordingly, Hammond reiterated a neutral (ie, Hold) rating on PLUG stock, along with a price target of $32. The rating may be moderate, but there is a 23% increase from current levels. (To view Hammond’s track record, click here)
The rest of the Street’s opinion is positive. Based on buy 10 vs hold 4 and sell 1, the stock has a consensus rating for average buy. The average price target stands at $43.60, suggesting the stock will rise 62% over the next year. (See PLUG stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.