The electric vehicle revolution is in full bloom. Whether it will beat the internal combustion engine (ICE) is still up in the air. After all, the world still produces nearly 80 million fossil fuel vehicles per year. Electrical vehicle production is still a tiny portion of that. That’s the good news, however, because the balance between the two is the upside opportunity. Plug Power (NASDAQ:PLUG) stock stands to benefit from this shift.
Plug was already innovating in the industry, and now it can get more lift from the EV trend.
PLUG can lend a hand to help electric motors topple ICE. The company has already entered the utility vehicles space, next it could transition into passenger cars and trucks.
Although I support the green movement, I don’t believe the current EV solutions are the answer. Simply because the current battery technology presents an extremely restrictive offering. Imagine if all 80 million new vehicles next year were EVs. We would not have enough batteries to run them.
Moreover, our landfills would be teeming with toxic material. In essence, we would be swapping out one evil for another. Nevertheless, for now, the world is attempting to do this.
Toward this end, U.S. politicians finally passed a major infrastructure bill. In it, they promised to deliver billions for building out alternative fuel infrastructure. Maybe PLUG stock will catch some upside from that. I always leave a lot of room for doubt when it comes to political promises. Therefore, my analysis today will not count on that opportunity as a key part.
Instead, I will strictly focus on the company’s own efforts and prospects.
PLUG Stock Has a Bullish Posture
First let’s discuss the stock chart and it is positive.
It broke out from $36 per share with an upside target closer to $48. There PLUG stock will face resistance because of the price action from March. Last week, I read headlines about a technical breakout. The headlines were not wrong, except that the neckline actually happened in October. Therefore, there might be a temporary stall for the next few days.
Investors who are already long it can stay so, but expect potential resistance in the short term. Longer term, the fundamental metrics are difficult to evaluate at this stage. The pandemic disruption from last year was too significant. It made it impossible to fairly judge PLUG’s financial metrics alone. Therefore, investors will need a lot of faith that management is still on point.
The charts also suggest that there is support below on dips. This usually means that investors are confident with the outlook of the company. After it peaked in February, PLUG stock collapsed 75%. But since the May bottom, it has consolidated sideways for months to establish footing.
Moreover, the bulls have also set a positive trend off of the October lows. There will likely be dips, but headlines aside, the bulls will eventually prevail.
Management Is Ready
According to their website, Plug Power has a leg up on the competition. The company is proud that it played an early mover role and that it has been at it for decades. Now it’s just a matter of fitting its model to the new trends. A few minor adjustments and the company can leverage its knowledge for the next decade.
Plug’s solutions are on the commercial side, so I imagine that it can make the leap to retail side. Regardless of which way it goes, the bullish thesis is too broad to short in concept. If you can’t short it, then it has to rise over time.
Therefore, the simple conclusion today is that if the stock markets are higher, then so is PLUG. Investors should feel confident buying dips to accumulate for the long term. Using options also provides alternative means of leaving room for error.
Conviction levels in the short-term outcomes are medium at best. This is because of the risk that comes from markets being at all-time highs. I am bullish, but I also am realistic that we are susceptible to surprise corrections.
The bulls are in charge and they will buy the dips. That’s why investors would be smart too take positions in smaller increments.
On the date of publication, Nicolas Chahine 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.
Nicolas Chahine is the managing director of SellSpreads.com.