Why Plug Power Stock Could Be the Ultimate Comeback Kid of the Decade


  • Plug Power (PLUG) stock has been shunned by the Street. But the firm continues to have many strong, positive catalysts. 
  • The demand for its green hydrogen will ultimately be very high.
  • PLUG stock carries significant risk, but it looks poised to rise tremendously over the long term.
Plug Power stock - Why Plug Power Stock Could Be the Ultimate Comeback Kid of the Decade

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Wall Street continues to dislike Plug Power (NASDAQ:PLUG) because it is losing large amounts of money, and the Street has little or no tolerance for such companies because interest rates are high.

Moreover, many of those who believe that higher-for-longer rates will inevitably doom such firms are selling short the shares of companies like Plug Power. They view such names as easy targets.

And yet, the longer-term outlook of Plug Power stock remains positive, driven by the continued, relatively rapid progress that the firm is making on becoming a green hydrogen powerhouse.

Given the firm’s achievements so far and its huge opportunities, I continue to view PLUG as a buy for risk-tolerant growth investors.

Plug Power Continues to Make Progress

On April 23, Plug Power announced that its Georgia and Tennessee green hydrogen plants had reached their maximum capacity. Specifically, the Georgia facility is producing 15 tons per day of green hydrogen, while the Tennessee plant is generating 10 tons per day.

As a result, the company is supplying about 50% of its customers’ fuel demand using the hydrogen that it’s producing on its own. That figure should reach about 70%, according to my calculations, when the firm adds the Louisiana plant, which is expected to be completed next quarter, into the mix. And the firm says that it’s “doing substantial work on other U.S.-based [green hydrogen] plants.”

Meanwhile, Plug’s electrolyzer business is continuing to rapidly grow. Electrolyzers are used to manufacture green hydrogen. On April 25, PLUG disclosed that it had made two new deals to build electrolyzers that will have a cumulative capacity of 350 megawatts. The firm now has an impressive total of 4.5 gigawatts of such deals.

Gross Margins Keep Rising

As I noted in a previous column, Plug has said that “it can churn out green hydrogen for $3 to $5 per kilogram” and sell it for $6 to $7 per kilogram.

Meanwhile, it has stated that it raised its prices for the fuel earlier this year, and it noted that the U.S. is going to implement “tax credits of up to $3 per kilogram for green hydrogen.” As I noted in the previous article, that means that “PLUG’s gross margin for the green hydrogen that it produces could exceed $7 per kilogram in some cases and will be over $1 per kilogram at the lowest.”

In March, CFO Paul Middleton reported that the gross margin of the company’s green hydrogen-making equipment business would reach the upper 30% range in the medium term. He stated that the business’s gross margins would rise significantly towards that goal this year.

Strong Demand for Green Hydrogen Persists

GE Vernova (NYSE:GEV) is a major provider of equipment for natural gas power plants. On the company’s Q1 earnings call, CEO Scott Strazik reported that GEV’s “customers are focused on how [natural gas] capacity additions this decade can be decarbonized in the next decade with both hydrogen and carbon capture.” Based on Strazik’s statement, I think it’s clear that many power producers are going to purchase a great deal of green hydrogen, which produces little or no carbon emissions, in the long term.

Much sooner than that, Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) have both agreed to buy large amounts of green hydrogen from Plug Power starting next year. Since they are looking to use green hydrogen to decarbonize their truck fleets, I predict that many other retailers will likely take the same approach. And Plug CEO Andy Marsh has said that the company could start providing fuel cells to data centers on a major scale at the end of next year.

PLUG Does Pose Risk, But It Should Pull Through

Plug burned $380 million of cash last year and $1.58 billion of cash in 2022, while it had just $135 million of cash and short-term investments as of the end of 2023. Additionally, its low stock price will make it harder for the firm to use its shares to generate cash and compensate its employees. Given these points, buying PLUG stock is not for the faint of heart,

But Plug Power maintains that it has ways to raise more cash relatively easily. Moreover, the firm is relatively confident that it will receive a $1.6 billion loan from the Department of Energy by the end of the year.

Given these points, along with all of the firm’s upcoming, positive catalysts, I believe that it will survive and ultimately thrive.

On the date of publication, Larry Ramer held long positions in PLUG, AMZN, and GEV. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 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 SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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