Strong Data Center Demand Should Boost Plug Power Stock

As expected, the adjustments of Plug Power’s (NASDAQ:PLUG) past earnings results turned out to be fairly inconsequential. Meanwhile, there have been more signs that the  company is poised to benefit tremendously from intense demand for “green hydrogen.” Not to mention, a number of Wall Street analysts are very upbeat on PLUG stock.

A 3D render of hydrogen fuel cells
Source: petrmalinak / Shutterstock.com

Given these points, I continue to recommend that investors buy the shares.

Fairly Minor Financial Restatements

Plug Power’s restatements lowered its 2020 earnings per share by just 10 cents to -10 cents. For the first quarter, Plug expects its top line to jump 60%+ year-over year and come in above $67 million. In Q2, Plug continues to expect revenue of over $102 million and gross billings of  more than $105 million.

Moreover,  Plug still expects its gross billings to come in at  $475 million, $750 million 2022 and $1.7B for 2021, 2022, and 2024, respectively.

Although Plug’s Q1 and Q2 guidance came in below analysts’ average estimates, multiple analysts remained upbeat on PLUG stock. (I’ll outline two analysts’ recent calls on Plug’s shares later in this article.)

Further, Plug Power reported that “the adjustments did not affect Plug’s cash position, business operations or economics of commercial arrangements, and there were no changes to {its} gross billings data.”

I think that these restatements should not affect anyone’s investment thesis on PLUG stock.

Green Hydrogen Demand Looks Poised to Be Very Strong

Louis Navalier, an investor with a great track record who’s an InvestorPlace columnist,  recently wrote a very upbeat column about Plug’s large exposure to green hydrogen. As Navalier pointed out, green hydrogen is produced by electrolysis that’s powered by renewable energy.

He also noted that the New York plant which Plug is developing is supposed to “produce 45 metric tons of green hydrogen daily once fully operational.”

Finally, Navalier stated that the company is looking to produce “500 tons of green hydrogen daily by 2025.”

He also disclosed his belief that “Hydrogen fuel cells have big (and in Plug’s case, proven) potential in industrial and commercial transportation, where plug-in {electric vehicles} simply aren’t practical. ”

I’ve long believed that hydrogen will eventually power tens of thousands of trucks that cannot, for multiple reasons, use electric batteries. One of these reasons is the fact that such batteries have to be huge to propel trucks with large loads for even several hundred  miles. Recently, I’ve become more upbeat on industrial demand for hydrogen.

While I’ve long believed that e-commerce companies will keep demand for hydrogen growing meaningfully, I now believe that tech companies will utilize a meaningful amount of hydrogen as well.

Demand For Data Services

In February, Techerati reported that, “as demand for data centre services continues to grow, and more companies make pledges to go green, controlling energy consumption and seeking out alternative energy sources is a top priority. In addition to popular renewables like solar, wind and hydro power, one area that data centres are exploring is using hydrogen fuel cells as an energy source.”

Indeed, renewable sources provide intermittent energy, and electric-storage batteries are still rather expensive and inefficient. Consequently, it makes sense for tech companies which have pledged to turn completely “green” to utilize green hydrogen, at least as a backup power source.

Hydrogen, after all, is not dependent on the grid or the weather to function, and it’s “more efficient over longer durations than batteries,” according to a Duke University blog.

Two Analysts Are Upbeat on PLUG Stock

James West, an analyst at Evercore ISI, recently wrote that Plug’s financial restatement had reduced the “uncertainty” that the company had been facing. He kept an “outperform” rating on the shares.

Meanwhile, Oppenheimer analyst Colin Rusch contended that Plug Power was “positioning itself to be the global leader in green hydrogen production.”

The Bottom Line

Plug Power’s restatement turned out to be fairly inconsequential.

Also, the company is poised to benefit from being the leading green hydrogen producer.

The market is now starting to get over its “all growth stocks are bad” mentality from earlier this year.

The green stocks are starting to charge higher amid increased optimism that an infrastructure bill will be enacted – an excellent time for investors to buy PLUG stock.

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

Larry Ramer has conducted research and written articles on U.S. stocks for 14 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 GE, solar stocks, Ford, Exxon, and Snap. You can reach him on StockTwits at @larryramer. 


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