Plug Power (NASDAQ:PLUG) stock is a hot stock on the radar of many investors. The company has benefited from a series of positive events. Powerful macroeconomic factors including a push toward alternative fuels and cleaner energy continue to help ‘green’ stocks in general. Plug Power is certainly among the beneficiaries. But the company’s tailwinds extend beyond those overarching macroeconomic factors.
Namely, the company had a strong second quarter giving it the confidence to provide strong Q3 guidance. It also upped the ante on previous 2024 financial targets. This confidence bolstered market sentiment around PLUG shares.
Further, Plug Power finalized two important acquisitions which increase the scope and scale of its operations. This succession of positive news has seen Plug stock nearly triple to around $12 per share out of the pandemic lows. Shares began rising mid-September of 2019 after a long period of stagnation.
Excitement and Digestion
That’s how I would characterize investor sentiment around Plug Power shares currently. There’s plenty to be excited about.
The company delivered $72.4 million in gross billings in Q2. It has given guidance of between $110 million and $115 million for the same metric in Q3. Give the company this much: they’re bold. If Plug Power hits that target, it’ll represent a 51.93% increase on the low end. At $115 million in Q3 billings, that’s a 58.83% increase in gross billings.
Let’s just focus on this and not the longer-term considerations. Revenue records were reported, share prices rose. As per the company, this was 68% growth over a record Q1.
Basically shares tripled in the same period. This, along with a general sentiment that markets might be overvalued, has led to reflection. Markets are pausing and digesting. This would be wise advice for any investors who might go headlong into Plug Power shares right away.
2 Things Must Transpire in Q3
Plug Power has made a bold bet with its Q3 guidance. So it has to hit those revenue billing projections. Otherwise, markets will punish it. This is fairly obvious.
On a broader level, Plug Power has to hope that market sentiment in general doesn’t cool, specifically market sentiment around clean energy and EVs and hydrogen. Luckily that doesn’t look to be the case.
My feeling is that this company has a good chance to continue appreciating. However, I think it’s probably best to wait until Q3 earnings are near before doing so.
The Longer Term
PLUG stock is basing a significant portion of projected growth on its recent acquisitions of United Hydrogen and Giner ELX. The company expects that it’s going to be one of the largest green hydrogen producers in the U.S. in the next few years.
These acquisitions gave the company the confidence to make the following statement:
“With these acquisitions and ongoing efforts, we are reaffirming our recently increased 2024 guidance to $1.2B in revenue, a 20% increase from September 2019, and adjusted EBITDA of $250M, a 25% increase. This only further underscores growth and margin leverage from the two acquisitions.”
Yes, these are simply projections. But I personally like this because it gives investors two things: one, a clear indication of strategy. And two, metrics by which to keep the company accountable going forward.
PLUG Stock Takeaway
The company is in a cooling period. There is little chance it can continue to rise week after week as it has for the past months. Markets have to digest the appreciations in price which have already transpired.
But you have to like this company for a few reasons. In my case, any time a company can prove that it is increasing revenue and making deals in an emerging sector, I’m interested.
I think investors who have shares currently are in a good place assuming they haven’t purchased at highs.
Plug Power has given guidance. Investors have a yardstick with which to measure the company’s progress in the coming quarter. Markets also know what the company is looking to achieve through 2024.
In my mind, just buy on a dip and keep an eye out for red flags otherwise. But I think potential and revenue achievements alone make this worth a look on a dip.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
