New York-headquartered Plug Power (NASDAQ:PLUG) has been around since 1997, but the company has really captured investors’ attention during the past few years. Evidence of this can be seen in the elevated trading volume of PLUG stock.
Plug Power has earned its reputation as an early and aggressive player in the hydrogen fuel cell market. Notably, Plug Power claims to own 95% of the current market share for hydrogen fuel cells in the material handling space.
Interestingly, the PLUG stock price doesn’t seem to reflect a full appreciation of the company’s firm foothold in that niche market.
That’s not a problem at all, as contrarian investors should relish the opportunity to scoop up the shares as hydrogen fuel cell technology continues to advance a surprisingly cost-efficient energy source.
PLUG Stock at a Glance
As 2020 came to a close, PLUG stockholders were enjoying excellent gains. It had only taken a few months for the share price to ascend from less than $5 to more than $30.
Then, in early January of 2021, the stock took off like a rocket. Amazingly, it reached a 52-week high of $75.49 on Jan. 26.
In hindsight, we can now see that this rally was an instance of “too far, too fast.” From February through the first half of April, the force of gravity started to pull on PLUG stock.
At the close of the markets on April 23, the stock settled at $27.98. Chances are, you won’t get to buy the shares below $5 again anytime soon.
However, at least there’s an opportunity to start or add to a position at a pretty good discount.
Green vs. Gray Hydrogen
Hydrogen fuel cell technology is nearing a crucial tipping point. For companies like Plug Power, the $2 level could be of great significance.
No, I’m not referring to the PLUG stock price. Rather, I’m citing the Energy Department’s view of $2 per kilogram as the threshold for hydrogen’s viability as a practical and economic fuel source.
Plug Power specializes in green hydrogen, which is produced by renewable sources like wind and solar energy. The selling point here is that green hydrogen is emission-free.
At the moment, I’m not able to say that green hydrogen is the cheapest fuel source. Currently, green hydrogen costs $5 to $6 per kilogram.
Meanwhile, gray hydrogen, which comes from natural gas and does release carbon emissions, only costs $2 per kilogram.
Most of the hydrogen produced in the U.S. today is classified as gray hydrogen. Without a doubt, cost-efficiency is one of the reasons why this is the case.
No Technical Barriers
So now, we can see why the Energy Department chose $2 as the key level for hydrogen fuel sources.
Plug Power is making a big push into green hydrogen energy. The company projects using more than 80 tons of hydrogen in 2024, and has committed to achieving 50% green content.
This raises the question of whether $2-per-kilogram green hydrogen is feasible. One expert, ACWA Power CEO Paddy Padmanathan, seems to believe it’s entirely possible.
“From an industry perspective, we see no technical barriers to achieving this, so it’s time to get on with the virtuous cycle of cost reduction through scale up,” Padmanathan declared.
Padmanathan envisions that sub-$2 green hydrogen can be achieved within four years, due to the “collective ingenuity and entrepreneurship of the private sector.”
But let’s not forget that we have a government that’s currently quite supportive of clean energy and ESG initiatives. So, perhaps the public and private sectors can both pitch in to help break through that $2 barrier.
PLUG stock is down on a short-term basis, but the long-term trend is still to the upside.
Therefore, if you’re bullish on green hydrogen as a fuel source that’s emissions-free — and hopefully, will soon be more cost-efficient — then Plug Power still deserves a place in your ESG holdings.
On the date of publication, Louis Navellier had a long position in PLUG. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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