The businesses of some of Plug Power’s (NASDAQ:PLUG) largest customers are benefiting from strong demand, and the company said that its orders haven’t changed as a result of the coronavirus crisis. Meanwhile, the PLUG stock price has tumbled in recent weeks, drawing some investor attention.
Plug Power’s largest customers are doing well. Amazon (NASDAQ:AMZN) has hired 100,000 new workers, indicating that demand for its products has been strong during the coronavirus shutdown. Meanwhile, Walmart plans to hire 150,000 new employees through the end of next month, CNBC reported on March 20. Obviously, Walmart is also doing quite well. Together, the firms are two of Plug Power’s three largest customers.
The third major customer, Kroger (NYSE:KR), is also doing very well, as the grocery chain’s same-store sales surged about 30% year-over-year in March. Meanwhile, most stores owned by Home Depot (NYSE:HD), which is rumored to have become Plug Power’s third-largest customer, appear to be open, and the same is also true for Lowe’s (NYSE:LOW), which has bought PLUG fuel cells for its material-handling vehicles.
Most of Plug Power’s major customers are staying open and the products of its two largest customers are apparently flying off store and warehouse shelves. As a result, it’s not surprising that Plug Power CEO Andy Marsh, in mid-March said, “being primarily in food retail and internet sales, we haven’t had any change in orders.”
Since the mass closures in America were extended to more states, counties and cities at the end of March and in early April, demand for the products of Plug Power’s customers likely continued to be strong and may have even accelerated. As a result, in recent weeks, the company’s customers may have decided to order more of fuel cells for material-handling vehicles.
Could the Surge Last?
Marsh said he thinks that e-commerce will be stronger after the crisis ends than it was before the epidemic began.
“Retail internet sales of food are going to come out of this stronger than ever before. The grandmom who never bought food online before is now having deliveries dropped off at her front door,” the CEO told Albany Business Review.
I’m not sure if Marsh is right; I could easily see most grandmothers going back to shopping at food stores because they’re more comfortable with brick-and-mortar than a website. Still, Marsh could be correct. And if Walmart and Kroger think that he may be right, they could very well order more fuel cells from Plug Power in the near-term than previously expected to prepare for an ongoing e-commerce demand surge.
Truck Project and Surging Oil Prices Could be a Boost
In a column published on March 10, I noted that Marsh had said that Plug Power was partnering with at least two of its “pedestal customers” to develop hydrogen fuel-cell trucks. I reported that Plug Power’s “two known pedestal customers are Walmart and Amazon, and there has been a great deal of speculation that the third is Home Depot.”
Theorizing that Walmart and Amazon both “want to impress the young, environmentally conscious consumers,” I speculated that they were partnering with Plug Power on “green” trucks. I also estimated that fuel-cell trucks would move the needle for PLUG stock.
With demand for products from Walmart and Amazon remaining strong and the use of trucks not restricted by governments, I remain upbeat on Plug Power’s truck project.
Meanwhile, after President Trump tweeted that he expects Russia and Saudi Arabia to cut their oil output by 10 million barrels to 15 million barrels per day on April 2, oil prices surged. If that trend continues, PLUG stock will get another boost. That’s because, for better or worse, alternative-energy stocks still tend to largely rise and fall in tandem with oil prices.
Bottom Line on PLUG Stock
Plug Power is likely to benefit from the strength of its major customers during the coronavirus outbreak. The company will also continue to be boosted by the proliferation of e-commerce, and it should also get a lift from its new truck business and rising oil prices.
Despite these positive drivers, PLUG stock has tumbled 25% in the last month. As a result, investors should buy the shares at this point.
As of this writing, Larry Ramer did not own shares of any of the aforementioned companies. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
