Investors in liquid hydrogen provider Plug Power (NASDAQ:PLUG) stock are already having a great start to 2021. Year-to-date, PLUG stock has more than doubled. Put another way, the proverbial $1,000 invested in the shares on Dec. 31, 2020, would now be worth over $2,000, in a matter of weeks.
Those eye-popping gains come at the back of a great 2020 when the shares had already returned about 750%. By comparison, Tesla (NASDAQ:TSLA) stock was up about 720% in 2020. PLUG stock’s 52-week range has been $2.53 to $73.90.
The presidential election season was the catalyst behind the rally in many alternative energy stocks like Plug Power. In addition, the shares got a recent boost thanks to corporate developments. On Jan. 12, 2021. Plug Power announced an upcoming 50/50 joint-venture with the France-based automaker Renault (OTCMKTS:RNLSY). The two companies “will establish in France state-of-the-art innovation and manufacturing capabilities for hydrogen fuel cell systems and their integration in vehicles.”
Prior to that announcement, on Jan. 6, PLUG stock got the seal of approval when the company “and SK Group, one of the leading South Korean business groups, announced today that the companies intend to form a strategic partnership to accelerate hydrogen as an alternative energy source in Asian markets.”
Both announcements brought fresh hopes for even a brighter new year for Plug Power. With a new Washington administration that is expected to support more clean energy initiatives, PLUG stock is likely to make new highs in the coming days. However, I expect profit-taking to kick in once the shares reach $80. Therefore in the coming weeks, wild swings in PLUG stock are likely. Buy-and-hold investors may regard any decline toward $50 or below an opportunity to go long on the shares.
Carving a Niche
Latham, New York-based Plug Power was founded in 1997. It specializes in hydrogen fuel cells, which are being regarded as a viable alternative to lead-acid batteries. Since its early days, the company focused on providing fuel for small (warehouse forklifts) and large (delivery vans and airport safety equipment).
According to Q3 results announced in early November, gross billings were $125 million, an increase of 106% year-over-year (YOY) and 73.4% sequentially. The metrics marked “the highest quarter in the company’s 22-year history.”
Analysts were also pleased to see the increase in the number of fuel cell units deployed. The company “deployed another record 4,100 fuel cell systems and 13 hydrogen fueling stations in Q3 2020.” Put another, the number meant an increase of 130% YOY.
Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), and Kroger (NYSE:KR) are among some of the leading customers which use Plug Power’s hydrogen fuel cells in their warehouse forklifts. The quarterly report noted, “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.”
Management also increased the 2020 gross billings guidance to $325 million to $330 million from $310 million. The recent price action in PLUG stocks shows that investors were pleased with these results.
Over the past several decades, Plug Power focused on a niche part of the alternative energy market. 2020 became the year its efforts started paying off significantly. Given the recent corporate developments and partnerships, we are likely to see PLUG stock continue to hit the headlines.
The Bottom Line on PLUG Stock
Last year saw Plug Power exert its name in the material handling and clean energy sectors. PLUG stock started 2021 on firm footing, too. Therefore, I am bullish on the company in the long run.
Yet PLUG is a momentum stock,. Thus, its short-term fortunes rely on how day traders behave. Plug Power stock’s beta is over 1.7, making it much more volatile than broader markets.
In the coming days, as Washington welcomes a new administration that is likely to provide more tailwinds for clean energy companies, I expect PLUG stock to reach $80. Then short-term profit-taking is likely to hit the shares. In the case of such a decline, any move toward $50 would improve the margin of safety for buy-and-hold investors.
These past several months have seen the clean energy space become more crowded. I believe consolidation in the industry could be in the cards, which could mean Plug Power gets acquired, too.
Finally, those investors who would rather invest in an exchange-traded fund (ETF) that has PLUG stock as a holding have plenty of choices. Examples include the First Trust Clean Energy ETF (NASDAQ:QCLN). the Global X CleanTech ETF (NASDAQ:CTEC) the Invesco DWA Industrials Momentum ETF (NASDAQ:PRN) or the SPDR S&P Kensho Clean Power ETF (NYSEARCA:CNRG).
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.