After reporting much stronger-than-expected third-quarter results and raising its full-year gross billing guidance, Plug Power (NASDAQ:PLUG) continues to have powerful, positive catalysts, and PLUG stock still has room to grow.
The company is still making meaningful progress on many fronts, including material-handling vehicles, hydrogen creation, and vehicle production.
Meanwhile, its backup-power business could eventually become lucrative. Plug Power’s earnings per share came in at – 4 cents, versus analysts’ average estimate of -7 cents. Its revenue soared 80% year-over-year to $107 million, versus the mean estimate of $105.77 million.
The company’s EBITDA, excluding certain items, came in at $24 million, and it raised its full-year gross-billings guidance to $325-$330 million from $310 million.
Since a majority of Plug Power’s revenue is now generated by its material-handling business, the company’s strong overall results indicate that the unit is doing very well. Moreover, on the company’s Q3 earnings conference call, its CEO, Andy Marsh, reported that the company is in talks with four firms that could become its next “pedestal customer.”
The latter term is used by Plug Power to refer to its large-scale material-handling customers. So in theory, the company could, relatively soon, have four more large customers buying its material-handling products.
A Closer Look at PLUG Stock
The growth of Plug Power’s material-handling business could slow slightly as the novel-coronavirus pandemic eases in coming months.
However, with four potential huge customers in the pipeline and many retailers looking to tremendously boost their e-commerce operations, Plug’s core material-handling unit remains very well-positioned and should continue to expand quite rapidly.
On the hydrogen-fuel front, Marsh reported that the company had “built 13 hydrogen fueling stations” in Q3. Additionally, the company plans to develop five “green hydrogen plants that will generate 100 tons of green hydrogen by 2024.”
To accomplish that goal, Plug is partnering with two heavyweights in the renewable-energy space: Brookfield Renewable (NYSE:BEP) and Germany’s Apex Energy. Moreover, Plug Power continues to progress towards building its “gigafactory” which will produce equipment used to make hydrogen, as Marsh reported that Plug would soon announce the plant’s location.
I remain convinced that, due to the combination of governments mandating clean-energy use, large companies looking to lower their carbon footprints, and the limitations of battery-electric power, the demand for hydrogen will jump exponentially in the next several years.
With the steps it’s taking now, Plug Power is poised to benefit a great deal from that trend, greatly boosting PLUG stock in the process.
Plug Power’s Newer, Strong, Positive Catalysts
When it comes to on-road vehicles, Plug has three new partners: a large gases and engineering company Linde (NYSE:LIN), major South Korean infrastructure conglomerate Doosan and an unnamed European firm.
Plug Power has said that its fuel cells can be refueled “five to six times” more quickly than electric batteries and offer 500 miles more range than electric batteries.
Further, as I’ve pointed out in the past, hydrogen can be stored on-site, making hydrogen vehicles less likely to be stymied by electricity outages than battery-electric vehicles. At a time when there are many hurricanes and other adverse weather events, that’s an important advantage.
Speaking of poor weather, Plug Power’s backup-electricity business seems to be starting to take off. More specifically, Marsh reported that data-center operators and logistic companies have become interested in using the company’s fuel cells as “large scale backup power solutions.”
The combination of adverse weather events, electricity outages in California and regulations against using internal-combustion energy solutions is fueling that business.
In the past, I’ve said that the combination of solar panels and batteries would likely prevent fuel cells from being massively deployed as electricity sources. But this year’s electricity outages in California have shown that batteries aren’t widespread or inexpensive enough to provide backup power on a wide scale, leaving the door open for fuel cells to do the job.
“Fuel cell and hydrogen, because of energy and gravimetric density, have the same advantages in the market, as on-road vehicles versus batteries,” Marsh said.
Over the longer term, this business could very well move the needle for Plug Power and PLUG stock.
The Bottom Line on PLUG Stock
Given Plug Power’s huge opportunities and its continued progression towards capitalizing on those opportunities, the stock’s market capitalization of $9.5 billion makes the name a bargain for long-term, growth investors.
On the date of publication, Larry Ramer held a long position in Plug Power.
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 Roku, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.