Buy Plug Power Stock on Its Recent Fall Before Earnings

Plug Power (NASDAQ:PLUG) and FuelCell Energy (NASDAQ:FCEL) are both hydrogen fuel cell companies, but there are huge differences between them. And as I stated in the past, I think that PLUG stock is well-positioned to rally, while the outlook of FCEL is poor.

Buy PLUG Stock on Its Recent Fall Before Earnings

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However, Plug Power stock appears to have unjustifiably retreated in the past week because FuelCell Energy on Jan. 22 reported that its fourth-quarter revenue had tumbled 38% versus the same period a year earlier. As a result, I believe that the recent decline of PLUG stock created a good buying opportunity.

PLUG is due to report its Q4 earnings on Thursday. And I think that its results will show that it’s head and shoulders above FCEL. As a result, this will cause PLUG stock shares to surge.

Plug Power focuses on providing hydrogen fuel cells (HFCs) for material-handling vehicles and on-road vehicles. On the other hand, FuelCell’s main products provide large amounts of electric power to businesses.

As I noted in a recent column, I thought that Plug Power would succeed going forward. Specifically, I contended that the rapid growth of e-commerce and the impact of climate change would greatly increase demand for PLUG’s solution. This is because companies are building more warehouses in which material-handling vehicles are widely used. Additionally, the higher frequency of bad storms increases the demand for vehicles that can be quickly refueled without gasoline.

Conversely, I was bearish on FuelCell’s power-generating products. That’s because, unlike PLUG’s offerings, there are no indications that FuelCell’s products save money or meet a growing need. On the contrary, as I noted in the prior column, the combination of solar energy and batteries “provides the same benefits” as FuelCell’s products.

Huge Customers, Big Partner

Plug Power has made multiple deals with huge customers. As I noted in my prior column on PLUG, Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT) have committed to buying tens of millions of dollars of the company’s products. To acquire tens of millions of shares of PLUG stock, the companies have to each buy hundreds of millions of dollars of PLUG’s offerings.

As I noted previously, the company announced early this year that “an unnamed Fortune 100 company is going to spend $172 million on PLUG’s products over two years.” Also, PLUG has made deals to power the vehicles of FedEx (NYSE:FDX) and Germany’s mail carrier, Deutsche Post.

Importantly, PLUG has launched a partnership with ENGIE, a global energy services company that has a presence in 70 countries, revenue of 61 billion euros and 160,000 employees. ENGIE is clearly well-connected in its home market of Europe, as it has partnered with huge French electricity company EDP, Fiat Chrysler, and large French bank Credit Agricole, among others. During Plug’s Q3 earnings conference call, CEO Andrew Marsh reported that ENGIE had helped PLUG obtain a deal worth more than $6 million, and was helping it close another contract. The partnership, like the company’s deals I described above, indicate that PLUG’s products are reliable and meet important needs.

Promising Financial Results

Some pundits are bearish on PLUG stock because its bottom line has historically been deep in the red. And, it still is reporting bottom-line losses.

But in Q3, PLUG’s gross margin was roughly positive 10%, as its net revenue came in at $56.4 million, while its total cost of revenue was $51.1 million. In the first nine months of the year, its gross margin was positive 6.5%. These figures show that the company is becoming more profitable. And its overall bottom line will turn positive if the company sells more of its offerings.

Since PLUG ‘s revenue rose 6% year-over-year last quarter, and the company’s positive revenue drivers are accelerating, the company is clearly on the way to becoming profitable.

Analysts Are Becoming More Bullish on PLUG Stock

Following PLUG’s Q3 results, Roth Capital analyst Craig Irwin upgraded the shares to “buy” from “neutral” and increased his price target on the shares to $6 from $3. Calling the company’s growth “impressive,” Irwin expects the company’s Q4 EBITDA to be meaningfully positive. Similarly, B. Riley FBR analyst Christopher Van Horn says that PLUG stock and its technology seem to be at positive turning points. He thinks that the company’s EBTIDA looks poised to grow at a compound annual growth rate of almost 90% from 2020 to 2024. Also, Van Horn has a $6 price target and a “buy” rating on the shares.

According to TipRanks, analysts have five “buy” ratings and only one “hold” rating on the PLUG stock shares.

The Bottom Line on PLUG Stock

PLUG has multiple, strong growth drivers, including the growth of e-commerce, climate change, and its partnership with ENGIE. Moreover, it looks poised to become profitable, and analysts are becoming more bullish on it.

Given these positive catalysts, investors should buy PLUG stock in the wake of its recent pullback.

As of this writing, Larry Ramer owns shares of PLUG stock.

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