It took me a very long time to appreciate the burgeoning demand for alternative energy; hence, I’ve been wrong on multiple counts on companies like Plug Power (NASDAQ:PLUG). As you likely know, PLUG stock has been one of the top performers in the market this year. Naturally, it has caused skeptics like yours truly to reexamine the company’s long-term viability.
To be fair, I’ve acknowledged before that public opinion has shifted favorably for renewables and alternative energy sources. Underlining this shift are growing concerns, especially among younger Americans, about climate change. Further, as our own Nicolas Chahine noted, PLUG is levered toward environmental, social and governance (ESG) investing, attributes that millennials take very seriously.
Frankly, I understated how much of an impact that this would have on the broader alternative fuel sector. Tesla (NASDAQ:TSLA) I could see. Plug Power? Not so much. Yet PLUG is clearly winning out.
More importantly, the novel coronavirus may have sparked a new paradigm shift for PLUG and its ilk. When oil prices crumbled at the onset of the pandemic, Saudi Arabia reacted with an oil price war with Russia. Briefly, this unprecedented conflict sent oil prices below zero.
On the surface, this benefited fossil fuels. However, it revealed how vulnerable American industries were to foreign conflicts. Shifting to alternatives would finally usher in true energy independence.
As well, Plug Power’s core clients like Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT) and Home Depot (NYSE:HD) are actually hiring people during this crisis. Theoretically, this bodes very well for Plug’s longer-term sustainability.
But to have confidence beyond the coronavirus, PLUG might depend on an unlikely person: first daughter Ivanka Trump.
Can Ivanka Keep PLUG Stock Great?
Recently, Ms. Trump revealed a jobs placement program that she spearheaded. According to Washington Post contributor Hamza Shaban:
Ivanka Trump urged out-of-work Americans to “find something new” Tuesday as part of a new jobs initiative designed to tout the benefits of skills training and career paths that don’t require a college degree.
But the effort — complete with a website, advertising campaign and virtual roundtable featuring Apple CEO Tim Cook and IBM chair Ginni Rometty — was swiftly derided on social media as “clueless” and “tone-deaf” given the pandemic, recession and Trump’s own familial employment history.
“This initiative is about challenging the idea the traditional 2 and 4 yr college is the only option to acquire the skills needed to secure a job,” President Trump’s eldest daughter and White House adviser said in a Twitter post. “This work has never been more urgent.”
Personally, I don’t give too much thought to the reactionary criticism. At this point, President Trump could hand out a million-dollar check to everyone and he’d still face backlash. We should at least give Ivanka Trump some time to let this program work.
At face value, the initiative seems promising for PLUG. If jobless Americans can perhaps receive government-subsidized training into new vocations, this effort might kickstart the economy. And if that happens, business overall returns, boosting demand for Plug Power’s alternative-energy solutions.
Sounds great, right?
Well, the reality is that this initiative has to work. Yes, PLUG’s core clients are doing well right now. But if jobless claims continue to number in the millions like they have since the crisis started, even these alpha dogs must respond with cuts of their own.
Of course, that would put the alternative fuel company in quite a pickle.
Plug Power Is at a Key Technical Crossroads
Interestingly, PLUG stock briefly touched $10 earlier this month before quickly correcting. At time of writing, shares are just above $9. Given the psychological importance of the $10 price target, we can easily tell that Plug is at a technical crossroads.
But it’s not just psychology at play here. Right when the Great Recession started, PLUG fell below this key threshold. Since then, it has acted as a long-term resistance line. Only recently though did shares truly threaten this resistance consistently.
To give time to both sides of the issue, bulls have reasonable justification to expect an upswing. Near the top, I mentioned the fundamental catalysts, namely the demand for ESG stocks and businesses. Moreover, PLUG could be charting a very long-term rounding bottom pattern.
If so, shares could be back to pre-Great Recession levels.
However, I believe the trajectory of PLUG depends on Wall Street’s economic outlook. Because right when this compelling technical pattern is developing, we’re on the cusp of a potential fiscal meltdown. We know that real GDP will collapse in the second quarter. But how deep will the damage be and what is our realistic probability of recovery?
Worryingly, that might depend on Washington finding consensus like it achieved to sign the CARES Act. Recall that the markets didn’t truly rally until the government gave this vital reassurance to the American people. But now, both Democrats and Republicans seem poised to kill each other, not negotiate for the betterment of this nation.
Therefore, if you truly believe that we’ll get a robust economic recovery sooner rather than later, PLUG could be a tremendous investment. On the other hand, if broader data looks bad, shares could be due for a steep correction.
The Smart Play Is Patience
Ultimately, the public has spoken – people want alternative energy. Given how quickly most of us have adapted to wearing face masks and social distancing, we are mentally ready for a fuel change.
But the question, of course, is whether we are financially ready. I can want an alternative-fueled vehicle all day long. My desires don’t count as economic activity until I have the means to transact on them.
Currently, the economic outlook is a binary dark horse that is ready to anoint geniuses and behead fools. Because of this stark reality, I’d like to wait for some more information before proceeding with a heavy wager.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
