Is Plug Power Stock Turning a Corner? Maybe

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If Wall Street investors had to name an asset that best represents the hydrogen fuel-cell niche, nearly everyone would probably pick out Plug Power (NASDAQ:PLUG) stock. Indeed, for many traders, that’s the only fuel-cell company they’re aware of (though of course, it’s not the only one out there).

Is PLUG Stock Turning a Corner? Yes... or at Least Maybe

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Yet, Plug Power stock also represents the dangers of buying high-flying assets; you may recall that the PLUG stock price quickly shot up to over $1,100 after its IPO, only to crater to penny-stock status in 2013.

Today, PLUG shares seem to be holding steady between $2 and $3, sparking a debate on whether it’s headed back to its former glory days or doomed to bankrupt its stockholders.

PLUG Stock Symbolizes an Entire Industry

Folks who wish to denigrate the hydrogen fuel-cell market could easily point to the long-term chart of Plug Power stock, and I won’t sugarcoat it: it’s an ugly, nasty chart. I’m not entirely convinced, though, that the entire fuel-cell industry should be written off, nor do I believe that PLUG stock ownership is a hopeless prospect.

As Nicole Casal Moore and Jim Lynch of the University of Michigan explain, hydrogen fuel-cell technology has “long held promise as a no-emission power source for electric cars” but has “taken a backseat to lithium ion batteries” in recent years. However, Moore and Lynch are quick to point out the chief advantage of hydrogen fuel cells: “The most abundant element in the universe, hydrogen is far more common than lithium, so there is little chance of there ever being a supply issue.”

For this reason, I could easily envision a supply crisis in lithium precipitating a sharp price increase in lithium ion batteries, thereby making hydrogen fuel cells a more attractive alternative. Automakers are constantly seeking ways to cut costs while consumers will invariably prefer lower prices, so I can only imagine that a shift towards abundant, cost-efficient hydrogen fuel cells will have a positive impact on the PLUG stock price.

Caution Is Always Advised

The foregoing bet on a resurgence in hydrogen fuel-cell adoption, however, is a speculative bet and even if I’m right about the lithium supply crunch, it’s not likely to happen for a long time. Therefore, the time to buy Plug Power stock probably isn’t right now, as you might be getting in too early — perhaps even by several years.

As you might expect, management at Plug Power would prefer that we buy PLUG stock right now, and of course they’re going to publish optimistic projections for the company. In that vein, Plug Power has announced an ambitious five-year plan with a 2024-dated target of $1 billion in revenues.

The plan also set objectives of $170 million in operating income, around $750 million in annual revenues, as well as $200 million in adjusted EBITDA for that same year. Personally, I’m a bit skeptical but remain hopeful that the hydrogen fuel-cell market will expand sufficiently to allow Plug Power to reach these ultra-ambitious targets.

There was certainly no lack of optimism on the part of Plug Power CEO Andy Marsh, who framed the company’s lofty sales target as a mere drop in the bucket:

We believe we have the team, technology and platform in place to execute on this five-year plan. Furthermore, this $1 billion in sales target represents less than one percent of our long-term addressable market, and believe we have substantial runway for growth beyond this target.

In order to achieve the aforementioned objectives, I suspect that the global demand for hydrogen fuel-cell technology would have to expand considerably — at the same time, Plug Power would need to maintain its dominant position in that niche market. Those are big “ifs,” but if they play out as Andy Marsh expects them to, the PLUG stock price could appreciate big-time in the coming years.

The Takeaway on Plug Power Stock

It’s probably too early to buy and hold PLUG stock with confidence that the price has found a long-term bottom. Still, Plug Power stock is worth watching as the hydrogen fuel-cell market finds it footing in a rapidly changing world.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2019/09/is-plug-power-stock-turning-a-corner-maybe/.

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