The last time I weighed in on Plug Power (NASDAQ:PLUG), I said that investors interested in hydrogen stocks should use their current weakness as a buying opportunity. That was on Sept. 22, at which time PLUG stock closed at $26.92.
While PLUG has since pulled back to $25.06 at the start of Oct. 7, I’d still use weakness as an opportunity — especially as it finds support at the lower range of a tight channel. From here, with patience, and the potential for a $12 trillion hydrogen market, the PLUG stock could rally back to $35, near-term.
First, Numerous Shortage of Catalysts for Hydrogen
Goldman Sachs already said hydrogen is a “once-in-a-lifetime opportunity,” saying it could be worth $12 trillion by 2030, which could help fuel stocks like Plug Power.
Furthermore, the International Energy Agency (IEA) has said the world needs a $1.2 trillion investment in hydrogen by 2030 to meet net zero goals.
In fact, according to a new IEA report, “Global Hydrogen Review 2021”
“Countries that have adopted hydrogen strategies have committed at least USD 37 billion; the private sector has announced an additional investment of USD 300 billion. But putting the hydrogen sector on track for net zero emissions by 2050 requires USD 1,200 billion of investment in low-carbon hydrogen supply and use through to 2030.”
While hydrogen adoption is growing, it still falls short of what is needed to meet targets. We’re even seeing hydrogen demand from major automakers. BMW (OTCMKTS:BMWYY), for example, built a hydrogen car prototype. Volkswagen (OTCMKTS:VWAGY), too, has said it was looking into hydrogen technology.
In short, hydrogen is just beginning to thrive, which is great news for Plug Power.
Second, California’s Biggest Green Hydrogen Facility
In September, the company said it would construct a green hydrogen production facility in Fresno County, California.
Once complete, it’s expected to produce about 30 metric tons of liquid green hydrogen and serve customers from San Diego to Vancouver, as noted in a company press release. In August, it also broke ground on a green production plant in Georgia, where it plans to produce 15,000 gallons of liquid hydrogen every day. It’ll serve customers in the southeastern part of the United States.
Third, Impressive PLUG Stock Financials
Not only did Plug Power posted record second quarter numbers, it also raised 2021 guidance.
In fact, net revenue for the quarter was $124.6 million, as compared to $68 million year over year. Gross billings were $126.3 million, as compared to $72.4 million year over year, as well. The company also raised its guidance to $500 million.
While the company is facing margin pressures, RBC analyst Joe Spak, as noted by Barron’s, says it’s temporary. He was encouraged by guidance.
Fourth, Analyst Love for PLUG Stock
Wolfe Research analyst Steve Fleishman recently initiated coverage with an “outperform” rating, and a $34 price target. JP Morgan analyst Paul Coster says Plug Power is “positioned to be a leader in the hydrogen economy.”
Citi analyst P.J. Juvekar just reiterated a “buy” rating on the stock with a $35 price target. “Plug believes it can sell green hydrogen competitively to its existing customers similar to current liquefied grey hydrogen prices offered by industrial gas companies.”
Piper Sandler analyst Pearce Hammond just upgraded the stock to “overweight” with a price target of $33. The analyst believes PLUG has a good deal of upside ahead of it with hydrogen.
Even Cowen analyst Jeffery Osborne has a “buy” rating on the stock with a target of $41. Osborne also believes the company is well positioned in the hydrogen economy.
The Bottom Line on PLUG Stock
I’d use weakness as opportunity with Plug Power.
Hydrogen is under heavy demand. The IEA says we need $1.2 trillion in hydrogen investments to meet net zero goals, and the company is quickly expanding to meet that need. Hydrogen offers a $12 trillion opportunity, and analysts seem to love the stock. There are plenty of reasons to be optimistic.
From here, with patience, and the potential for a $12 trillion hydrogen market, the PLUG stock could rally back to $35, near-term.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.