Plug Power (NASDAQ:PLUG) stock continues to have multiple, strong, positive catalysts that make the shares worth buying.
When I first identified Plug Power as a beneficiary of the e-commerce explosion, it seemed to be a fairly new idea that was not being embraced by most people.
But I believe that now many investors and analysts are realizing that, as retailers, large and small, use expand warehouse operations to support their e-commerce operations, demand for Plug Power’s material-handling vehicles is surging.
This has been a little-noticed but very important catalyst behind the surge of PLUG stock.
PLUG Stock’s E-commerce Catalyst
The company’s disclosure earlier this year that Home Depot (NYSE:HD) is a major customer helped the Street realize that the e-commerce revolution was a key driver of PLUG stock’s fortunes. Multiple statements by Plug Power CEO Andy Marsh asserting that orders from most of the company’s customers continued to be strong amid the coronavirus pandemic also helped the thesis gain traction.
The company’s recent announcement of a significant deal with UK’s third-largest supermarket chain, Asda, also made investors realize how large Plug’s global opportunity is amid the e-commerce explosion. Although Asda is owned by Walmart (NYSE:WMT), which previously made deals with Plug Power, its contract with the British supermarket operator shows that the products do have appeal in outside of the U.S.
Indeed, after Plug Power announced the deal with Asda, Amit Dayal, an analyst at H.C. Wainwright, wrote that the company’s forklifts are “quickly becoming the go-to solution for big box retailers across the US and Europe,” according to SmarterAnalyst.
As Plug Power signs additional contracts with huge retailers around the world, more investors will realize the strength of the company’s leverage to the e-commerce revolution. In turn, that should fuel PLUG stock higher.
In-line with my previous predictions, the popularity of hydrogen-fueled trucks looks poised to blossom. As I expected, companies’ desire to be environmentally friendly and financial incentives from governments appear to be propelling this trend.
On July 22, Barron’s pointed out that both California and the EU have enacted policies that should make hydrogen trucks more popular. (I made similar observations in a July 15 column). Barron’s also noted that truck maker Paccar (NASDAQ:PCAR) mentioned “the word hydrogen … 20 times” on its last earnings conference call, with CEO Preston Felght commenting that:
“Paccar is simultaneously developing hydrogen fuel cell powered vehicles and has built 10 Kenworth T680s for customers in the Port of Los Angeles. In the longer term, hydrogen could be promising for long-haul applications due to its high energy density and its relatively fast refueling times.”
Barron’s believes that Paccar touted its hydrogen initiatives in order to boost its stock price. I think that was only part of its motivation; the truck maker is also seeking public relations points by being more green. Over the longer term, I think that desire by Paccar and other companies, along with governmental financial incentives, will greatly boost the use of hydrogen trucks.
Plug Power Remains Well-Positioned to Exploit the Trucking Catalysts
On Plug Power’s recent second-quarter earnings conference call, CEO Marsh succinctly and effectively explained why the company is poised to benefit from increasing demand for hydrogen. Referring to the company’s acquisitions of United Hydrogen and Giner ELX earlier this year, he said:
“Hydrogen provides us the platform to build large-scale commercial hydrogen plants and Giner ELX provides us the in-house capability to build and deploy electrolyzers for those sites. Giner ELX is renowned for their PEM technology and now coupled with Plug Power’s scale and manufacturing, we believe Plug Power will drive the cost of PEM electrolyzer technologies below current day alkaline electrolyzers technology.”
Electrolyzers are instruments used to produce hydrogen fuel, and PEM, or polymer electrolyte membrane electrolyzers, utilize plastic to produce hydrogen. Marsh added, “With better technology, better costs and a distribution network across Europe, Plug Power is well positioned to leverage the planned 80 gigawatts of deployment of electrolyzers in Europe and North Africa by 2030.”
By the end of Q3, Plug Power will be operating 100 hydrogen fueling stations, and the company has announced plans to build a huge electrolyzer plant (also known as an electrolyzer gigafactory).
Finally, Marsh indicated that the company is working with four truck makers on developing hydrogen trucks, and he indicated that Plug would disclose more information abut one of the alliances this year.
Bottom Line on PLUG Stock
Plug Power remains well-positioned to benefit from the e-commerce megatrend and the small but still sizable hydrogen-fuel trend.
Given the magnitude of those catalysts and the fact that the market capitalization of PLUG stock is still around $5 billion, I continue to recommend that longer-term investors buy the shares.
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. As of this writing, Larry Ramer owned shares of PLUG stock.