Investors in hydrogen fuel cell maker Plug Power (NASDAQ:PLUG) have had a great year so far. PLUG stock is up over 730% year-to-date and hit a recent multi-year high on Nov. 24. Its 52-week range has been $2.53 – $28.70.
The presidential election season has been the catalyst behind the rally in many alternative energy stocks like Plug Power.
In fact, since late September, PLUG stock has more than doubled. However, those investors with substantial paper profits may soon decide to take some money off the table. Therefore, in December wild swings in the price of PLUG stock are possible.
Potential investors may regard any decline toward $22.5 or below an opportunity to go long Plug Power shares.
PLUg Stock and the Green Market
Plug Power’s fuel cells are becoming an alternative to lead-acid batteries. The company’s technology uses hydrogen as fuel for vehicles small (warehouse forklifts) and large (delivery vans and airport safety equipment).
For instance, Joe Blanchard of Plug Power has recently overseen a report, following The Fuel Cell Powered Airport GSE (Ground Support Equipment) Deployment Project that was initiated in 2013 between Plug Power and U. S. Department of Energy Fuel Cell Technologies Office (DOE).
FedEx (NYSE:FDX) was the third partner in the project. The final report was submitted to the U. S. Department of Energy Fuel Cell Technologies Office.
The study looked at the deployment of fifteen fuel cell powered GSE units for two years at the Memphis, Airport, the hub for FedEx.
According to the final report on this six-year study “the rate of change in the market moving from internal combustion to electric has dramatically changed from 2013 to 2019. Freight carriers like FedEx as well as passenger carriers at airports around the world are much more focused on sustainability and emissions today than 2013, thus moving entire fleets to electric power.”
Put another way, Plug Power has been carving itself a niche place in an upcoming part of the alternative energy market that aims to supply consumers with clean, sustainable energy. In the long-run, we can expect to hear the company’s name more often, which could easily help fuel PLUG stock to new highs.
How the Quarterly Results Came
The company released Q3 results in early November. Gross billings of $125 million meant growth of 106% year-over-year (YoY) and 73.4% sequentially. It was “the highest quarter in the company’s 22-year history.”
Another number investors pay attention to is the number of fuel cell units deployed. Plug Power “deployed another record 4,100 fuel cell systems and 13 hydrogen fueling stations in Q3 2020. This reflects year-over-year growth of 130% for fuel cell units deployed.”
Among the company’s customers are Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), and Kroger (NYSE:KR). Management highlighted, “During the height of the pandemic, Plug Power’s robust products were operating at 99% efficiency and moved ~30% of the retail food and groceries through the United States to support the needs of customers.”
Finally, the group also raised the 2020 gross billings guidance to $325 million – $330 million from $310 million. Investors have so far approved of the results.
However, from a fundamental perspective, the shares are richly valued. For example, its P/S ratio is well over 25. If you are an investor who also follows technical charts, you may be interested to know that due to the price increase in 2020, PLUG stock’s short-term charts are overbought and signalling caution.
The Bottom Line on PLUG Stock
Plug Power has cemented its name in the material handling sector. In the long-run, the company is likely to continue its recent success.
However, as a momentum stock, its short-term fortunes, in part, depend on the moves of day traders. Its beta is over 1.8, which means it is a lot more volatile than the broader market.
Therefore, investors with paper profits may want to ring the cash register and realize at least some of their impressive gains. A move toward $22.5 or even below would improve the risk/return profile for potential investors.
Meanwhile, the alternative energy space is becoming more crowded. There could likely be consolidation in the coming quarters and Plug Power could easily find itself a takeover candidate.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil Ph.D. has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination.