Amid new signs that hydrogen is poised to become widely used, Plug Power (NASDAQ:PLUG) is continuing to take steps that leave it well-positioned to benefit tremendously from this trend. Consequently, I still recommend that investors buy PLUG stock.
Among the recent moves by the company to prepare for the hydrogen future are announcing a hydrogen gigafactory and continuing to expand its network of hydrogen stations.
Signs continue to mount that hydrogen demand will surge within the next few years.
Hydrogen Demand Looks Poised to Explode
In California, the state is subsidizing the launch of “at least 100 hydrogen fueling systems.”
In June, as I previously reported, Sacramento decreed that some of the trucks and vans sold in the state must have zero emissions by 2024, while the state is seeking ways of raising demand for such vehicles.
By 2035, 50% of all the trucks sold in the state must not have any harmful emissions and “All short-haul… vehicles in ports and rail yards must be zero-emission by 2035 as well,” The Verge noted. Given the range and cargo limitations of battery-electric trucks, hydrogen trucks are likely to be widely used in California in the wake of the new rules.
Further, there’s a very good chance that other states will adopt similar rules. According to The Verge, “14 other states” wound up copying California’s rules on zero-emission passenger vehicles which the state began implementing in the 1990s. And seven other states, along with Washington, D.C., are holding discussions with California about adopting the same rules as California for trucks, The New York Times reported, The Verge added.
Growth Also Expected in Europe
Across the Atlantic Ocean, as I previously noted, “The EU stated that 14 nations within its borders have already taken steps to increase their use of hydrogen, and the bloc said that it would seek to ‘turn clean hydrogen into a viable solution to decarbonize different sectors over time.’
European companies are already looking to execute on the governments’ vision. In July, “11 European gas infrastructure companies presented a plan for transporting hydrogen throughout Europe,” Pipeline Technology Journal stated.
Meanwhile, U.K.-based BP (NYSE:BP) was one of several companies that was reportedly in talks with Nikola (NASDAQ:NKLA) about building hydrogen-refueling stations. Although the discussions “stalled” due to Nikola’s troubles, The Wall Street Journal reported, I believe that the companies will eventually build the stations.
Moreover, as I’ve noted many times previously, I think a high number of companies will ultimately utilize hydrogen trucks in order to gain public-relations points.
Plug Power’s Gigafactory and Charging Stations
After Plug Power bought Giner, which produces electrolyzers used to make hydrogen, Plug has committed to building a gigafactory (i.e. a huge factory). The plant will produce both electrolyzers and hydrogen fuel cells. Plug Power CEO Andy Marsh estimated that the factory may generate about $2 billion of revenue annually. Given the many positive catalysts for hydrogen use, I believe that the company could meet that goal within a decade.
Meanwhile, on Plug’s second-quarter earnings conference call in August, Marsh reported that Plug Power would have 100 operational hydrogen-fueling stations in the U.S. by the end of September. The CEO added that the company has hydrogen-fueling stations stretching from Maine to California.
The Bottom Line on PLUG Stock
Hydrogen looks poised to proliferate in the Western world, and Plug Power continues to appear to be well-positioned to benefit from that trend. Actually, I believe that Plug Power could become the Exxon Mobil (NYSE:XOM) of hydrogen.
Despite the strength of PLUG stock this year, the shares’ market capitalization remains below $5 billion.
Given that relatively low number and the company’s tremendous potential, I still think that longer-term investors should buy the shares.
On the date of publication, Larry Ramer held a long position in Plug Power.
Larry 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. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.