Plug Power (NASDAQ:PLUG) stock is gaining noticeably amid a soft performance on Wall Street during the midweek session. The uplift in sentiment centers on Citigroup analysts giving PLUG stock a “buy” rating. Overall, Citi believes that Plug Power enjoys a competitive advantage in the hydrogen economy. Still, PLUG remains a risky proposition despite its positive momentum in the trailing month.
According to Investing.com, PLUG stock started swinging higher prior to the opening bell. Initiating coverage on the company, Citi analysts wrote the following:
“PLUG has positioned itself at the center of the hydrogen economy through vertical integration. The company has strong customer relationships, sufficient liquidity, path to profitability and diversified assets.”
In addition, Citi stressed that Plug Power will act as an enabler of hydrogen switching. As a result, the company will likely capture near- to long-term opportunities through the hydrogen value chain. “Guidance on additionality and time matching as well as progress on gross margins should act as catalysts,” Citi added in a research note.
Citi set a PLUG stock price target of $13 per share. At the time of this writing, that target implies a return of roughly 22%.
Examining the Bullish Case for PLUG Stock
With such a strong endorsement from a well-respected financial institution, the bulls are naturally bidding up PLUG stock on Wednesday. In addition, today’s rally continues to put icing on the cake. Over the trailing one-month period, shares have moved up nearly 18% as of this writing.
Interestingly, though, PLUG stock is also down more than 12% year-to-date (YTD). This could mean that Plug Power may be undergoing a second-half resurgence. That said, investors may still wonder: Is PLUG stock likely to become key to the hydrogen economy?
Against a broader fundamental perspective, Plug Power benefits from a massive total addressable market. According to Precedence Research, the global hydrogen fuel cells industry reached a valuation of $1.91 billion in 2021. Further, experts project that the sector will expand at a compound annual growth rate (CAGR) of 60.1% from 2022 to 2030. By 2030, the market is expected to clock in at $131.06 billion. Needless to say, that’s massive potential for PLUG stock.
Still, Plug Power’s path to profitability represents a more complex narrative. True, the company benefits from decent liquidity based on its cash-to-debt ratio of 1.78. However, Plug also suffers from poor profitability metrics. On a trailing-year basis, both its operating and net margins are deep into negative territory. In fact, according to Gurufocus, PLUG stock suffers from six red flags, including rising debt levels and a poor Altman Z-Score, implying bankruptcy risk.
Why It Matters
At the moment, contrarians can still take encouragement from the consensus assessment for PLUG stock, which is a “moderate buy” on TipRanks. Based on 17 analyst opinions over the past three months, PLUG has 10 “buy” ratings and seven “hold” ratings. The average consensus price target for Plug Power lands at $18.39, implying more than 70% upside potential.
On the date of publication, Josh Enomoto did not hold (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.
