The Weakness of Plug Power Has Created a Buying Opportunity

Amid Plug Power’s (NASDAQ:PLUG) recent deals with major companies, new indications that hydrogen will likely become an important fuel in coming years, and the company’s improved financial guidance,  I remain quite upbeat on Plug stock.

3d render image of hydrogen energy fuel cell from Plug Power
Source: Shutterstock

While it’s true that the stock’s valuation has reached very high levels, I believe that the company’s first-mover advantage in hydrogen and the fuel’s likely upcoming boom nonetheless make the shares attractive.  Further, I think that the stock’s recent pullback will prove to be an excellent buying opportunity for longer-term investors.

Plug’s Recent Deals

A top South Korean conglomerate, SK Group, has agreed to  invest a massive $1.5 billion in Plug Power, Plug announced last month. Under the deal, the companies will also launch a joint venture and seek to sell “hydrogen fuel cell systems, hydrogen fueling stations, and electrolyzers to the Korean and broader Asian markets.”

Also in January, Plug Power divulged that it was launching a joint venture with the giant French automaker, Renault. The companies indicated that they would look to jointly develop and sell “fuel cell-powered vehicles and hydrogen turn-key solutions” in Europe.

What’s more, Plug Power announced that it had obtained a new, large-scale customer. According to Seeking Alpha columnist Henrik Alex, that customer appears to be General Motors (NYSE:GM). And finally, Alex reported that Plug had “hinted {at} its upcoming first deployment with a major U.S. data center customer.”

Positive Indications

Importantly, the governments of both South Korea and the EU are looking to greatly increase the use of hydrogen in their economies. According to Springer, a publisher which specializes in science:

“South Korea is focused on increasing the production and use of hydrogen vehicles, establishing an ecosystem for the production and distribution of hydrogen and related technologies, and expanding the production of fuel cells .”

South Korea’s efforts to promote hydrogen use make me optimistic that other major Asian governments will follow suit. Indeed, Japan has already done so, subsidizing over 130 hydrogen stations in the country.

Turning to the EU, the president of the bloc’s executive branch, Ursula von der Leyen, recently said that hydrogen has “a crucial role,” adding that, “clean hydrogen is a perfect means towards our goal of climate neutrality. It can power heavy industries, propel our cars, trucks and planes, store seasonal energy, heat up our homes.”

And the President proclaimed that, “We also want to make clean hydrogen the best choice in economic terms. The good news is: with enough commitment, we can reach the tipping point, where clean hydrogen becomes more competitive than its alternatives. ”

Plug Power Deals

Plug Power’s deals with SK Group and Renualt give Plug Power strong inroads into, respectively, the Asian and European hydrogen markets, both of which appear likely to become quite huge sooner rather than later, partly due to the support of  governments.

And in another good sign for hydrogen and, by extension, PLUG stock, NextEra (NYSE:NEE), a large electric utility, has apparently become very bullish on hydrogen. During NextEra’s recent fourth-quarter earnings conference call, its CEO, James Robo, indicated that the fuel would become a key means of storing energy.

Many years ago, NextEra first predicted that solar energy would boom, and several years ago it began forecasting that solar energy energy would be widely pared with batteries that would be used to store energy. Both predictions turned out to be completely correct. So the fact that its CEO is upbeat about hydrogen certainly bodes very well for PLUG stock.

Plug Power’s Guidance Hikes Are Positive

The company recently increased its 2021 gross billings outlook to $475 million from $450 million and hiked its 2024 gross billings goal to $1.7 billion from $1.2 billion. Finally, it increased its “green hydrogen” production goal “to 500 tons per day by 2025” versus its previous outlook of just 100 tons by 2024.

These guidance increases all suggest that the demand for  Plug’s products is rapidly increasing, boding very well for its longer-term outlook.

The Bottom Line on PLUG Stock

Plug Power just made one big deal with a huge company in Europe and another with a large firm in South Korea. With the EU and South Korea both heavily pushing hydrogen, Plug Power looks poised to generate large amounts of revenue in Europe, South Korea, and, eventually, all of Asia.

Meanwhile, NextEra’s favorable statements about hydrogen, along with Plug’s likely deals with GM and a data center, bode very well for the fuel-cell maker’s outlook in North America.

Given these points, I believe that PLUG stock can eventually climb much higher, making its recent pullback a good buying opportunity for longer-term investors.

On the date of publication, Larry Ramer held a long position in PLUG. 

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.


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