After nearly breaking below the $2.00 level in late-summer of 2019, Plug Power (NASDAQ:PLUG) staged a dramatic rally in the months that followed. PLUG stock now sports a market capitalization of over $1.2 billion.
Buyers loaded up on the stock when the company announced a $172 million order on Jan. 6. The company’s prospects are looking bright, even though the stock fell recently when FuelCell (NASDAQ:FCEL) reported weak quarterly results.
Are there enough reasons to buy more shares after the almost 20% rally?
Big $172 Million Order for Plug Power
Plug Power announced it had “received an order at the close of 2019 from a Fortune 100 customer for hydrogen fuel cell deployments across their distribution network over the next two years.” That $172 million order certainly made more than a few investors take a closer look at this maker of hydrogen engines and fueling solutions to enable e-mobility.
Sales of its GenDrive and GenCare products give Plug Power a strong start to kick of 2020. Chances are good that if the customer is satisfied with the deal, it may win more contracts. Plus, other large firms may follow by buying Plug Power solutions as well. The deal is relatively small compared to the company’s forecast of $1 billion worth of gross billings by 2024. But Plug Power has to start somewhere. Now that the company won a big order, investors may safely start a small position in PLUG stock.
The positive prospects do not stop there. Winning a large, multi-site, retail customer effectively puts an end to the bearish attack on the stock. The latest short squeeze, driven by the 15.94% short-float on PLUG stock, may send the shares higher in the near-term. To sustain the recent gains, Plug Power will need to raise its revenue guidance when it reports quarterly results on Feb. 6.
Q3 2019 Earnings
Plug Power posted adjusted EBITDA of $2.5 million in Q3, a period when it won an initial order for 240 units from Fiat Chrysler (NASDAQ:FCAU). This broadens its customer base, in which it already counts BMW, Honda, GM, Volkswagon, and Daimler.
The company continues to invest strategically. For example, its R&D spending levels will increase the power capacity of its products for many applications. It now has 15 to 20 applications in its queue. Looking ahead, the company will have a 125-kilowatt range ProGen engine available in the second quarter. When that happens, customers will test this engine and then orders should grow from there.
For 2024, Plug Power has guided to $1 billion worth of billings. $200 million of which will come from Europe. And one-quarter of that guidance ($250 million), will come from StreetScooter, an EV manufacturer owned by Deutsche Post DHL Group. Some 50% to 60% of those billings will come from Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT).
“We’re in discussions with people, programs for 2024, 2025. That being said, I think the learnings will be extremely valuable for on-road applications. And we have two applications in the aerial space, where our team is deeply engaged with customers and I think one of them will be a real surprise.”
Valuation and Your Takeaway on PLUG Stock
Assuming $1 billion in bookings within a few years, investors may use a 10-Year DCF Revenue Exit model. If revenue grows 20-30% in 2023-2024 and then falls to the single digits, then the stock has a fair value of ~$6.00 (per finbox.io). SimplyWallSt’s fair value model implies a price of $7.40 while analysts have a $4.80 price target (per Tipranks).
PLUG stock is a less-risky stock to speculate on even though it rallied in recent weeks. The company won a firm order and has many more to come.
Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities.