Plug Power (PLUG) stock forecast: Is it time to buy the dip?
The stock price of hydrogen and fuel cell maker Plug Power looks to be finally making some headway for the first time in 2002 as it has risen 48% since its low at the end of January to $25.9 today (21 March).
As the price of traditional hydrocarbon fuels has rocketed so attention has turned to the potential of alternative sources of energy particularly for transport.
Fuel cells may not carry the cachet of battery electric vehicles like a Tesla because they are favoured by larger vehicles such as trucks and buses. But Plug's CEO Andy Marsh recently suggested the sanctions against Russia for invading Ukraine are highlighting the "need to move away from the Russian gas station" has become a "national security issue".
Even before the war Plug Power laid out bullish plans for the company including a revenue goal in excess of $900m. Market sentiment seemed to be either that it did not believe the company could deliver those numbers or investors thought they were not being positive enough? Even so, now the thinking is turning to the green energy possibilities of fuel cells.
In its business update Plug Power said it could be seeing $3bn revenues by 2025 with a 20% margin. It expects to be producing 70 tons of green hydrogen a day by the end of the year and scaling up to 500 tons a day by 2025.
The company said its gross margin remains under the same pressures it experienced in the second quarter pressure and is driven by a range of factors including higher fuel, service, and product costs as well as the impact of COVID-19 on the global supply chain.
Based on current technical readings and fundamentals, is this a sign that finally fuel cells and Plug Power are on the up? Or is the downward drift set to return?
Other Plug Power company news
Aside from its latest earnings report, other Plug Power news includes its announcement on 19 August that it had appointed four key general managers to work alongside CEO Andy Marsh, each leading individual business units. The company said these appointments will help it manage its vertically integrated business and accelerate growth.
Moving forward, Plug Power’s business structure will be broken down into the four different units below:
Electrolyser Solutions – led by Ole Hoefelmann, a 30-year veteran of the hydrogen industry.
Material Handling and Global Key Accounts – led by Jose Luis Crespo, a seasoned professional with a strong retail background who will lead the company’s customer relation management (CRM) strategies.
Mobility and Stationary Power Solutions – led by chief operating officer and senior vice president Keith Schmid, who will be overseeing the firm’s research and development (R&D) efforts, and the roll-out of crucial infrastructure for the deployment of Plug’s solutions, products and services.
Energy Solutions – led by Sanjar Shrestha, who has been serving as chief strategy officer for the company since 2019. He will be in charge of building the company’s first green-hydrogen production network across the United States.
In mid-October, Plug announced it was buying Applied Cryo Technologies (ACT), a specialist in the equipment needed to store and move liquid gases such as hydrogen.
On 27 October, Plug revealed it had struck a partnership deal with Lhyfe – a producer and supplier of renewable and ecological hydrogen – to develop green hydrogen- generation plants throughout Europe. The initiative seeks to generate a total hydrogen capacity of 300 megawatts (MW) by 2025, and to start the development of a -gigawatt (GW) production site, said the company.
In October, Morgan Stanley’s head of North American equities research, power utilities and clean tech Stephen Byrd said in a note that Plug Power is “well positioned to be a leader in the hydrogen economy” and boosted the price target to $40.
On the same day, Plug Power announced a “strategic partnership with Airbus to study the feasibility of bringing green hydrogen to future aircraft and airports worldwide”.
In November Plug Power said it had agreed to buy Frames Group, a Netherlands-based maker of energy equipment. The deal, which includes €85m in cash and €30m in earnouts, was completed on 9 December.
On 14 December Plug announced that it had entered in a long term deal with Certarus (USA), a leading transporter of compressed natural gas, to "further scale and expand the infrastructure needed to accelerate the adoption of green hydrogen fuel."
On 15 December it inked a deal with leading Korean electric car manufacturer, Edison Motors to develop and bring to market a hydrogen fuel cell-powered electric city bus.
In the following Plug Power share-price forecast, we’ll discuss the company’s latest price action and fundamentals, and outline plausible scenarios as we approach the end of the third quarter of 2021.
Plug Power stock technical analysis
Plug Power stock (PLUG) posted three consecutive lower highs after reaching its June post-squeeze peak of $34.40 per share.
It’s important to remember that the PLUG price was severely distorted back in January–February, when coordinated efforts from retail traders from the popular Reddit messaging platform Wall Street Bets managed to pull a short squeeze on the stock.
Back then, major volumes in short-dated call options led to a gamma squeeze that eventually turned into a short squeeze as PLUG shares were heavily shorted.
However, once the bulls’ ammunition depleted, the bears took over, managing to drop the price from its 52-week closing high of $73.20 to a post-squeeze closing low of $20 per share on 10 May.
Since hitting that low, the price has bounced, but positive momentum has recently faded as the stock has descended to the $34 level from to $45 a share.
Trading volumes will likely play a key role in figuring if a break in any direction is relevant, as above-average volumes tend to validate the importance of certain price marks.
This opinion is made based on a technical assessment of PLUG’s price action – it should not be construed as a recommendation to invest in the stock, as the price could behave differently than outlined above. In any event, you should always conduct your own research before investing.
Plug Power fundamental analysis
Plug Power revenues grew from $82m in 2016 to $230m in 2019 at a compounded annual growth rate (CAGR) of 41%. However, the company had to recognise the negative impact of the accelerated vesting of remaining warrants, resulting in negative revenues of $94m during the full 2020 fiscal year. In the first three quarters of 2021 the company has reported $340m in revenues.
Gross profits have remained stubbornly negative each quarter since Plug Power reported $10.3m in top-line profits on the $230m it reported as 2019 revenue. It has reported net losses for the past five years (2016–2020), and burning nearly $250m in cash last year.
By the end of the second quarter of 2021, the company had cash and cash equivalents of $3.16bn, with long-term debt of $130m on assets of $5.8bn. With this in mind, solvency doesn’t seem to be a concern for Plug Power. However, subsequent equity offerings may further dilute shareholders, and it is possible Plug Power will need to raise more money to fund its ambitious projects.
At its current (as of 21 March) market capitalisation of around $14.6bn, the company is trading at more than 25 times its forecasted sales for 2021, according to data compiled by Koyfin. The fact that the business has not generated positive cash flows and is still struggling to make its business model feasible makes Plug Power a high-risk investment.
In this regard, any setbacks concerning the company’s ability to reach its goals of becoming a dominant force in the up-and-coming hydrogen-energy market may lead to a big fall in its valuation.
At the current valuation, a lot of hope seems to be priced into the stock, which means that positive developments may not have a sizable impact on the stock price unless they result in a significant change in the firm’s top- and bottom-line results.
According to data from Market Research Future, the market for hydrogen fuel cells is expected to grow to $52.7bn by the end of 2027. With that in mind, the market for Plug Power’s solutions and products is still fairly untapped, and – if the company manages to reach its goals – its upside potential could be huge.
That said, other businesses are also competing with Plug Power, including Panasonic Corporation and FuelCell Energy.
Plug Power (PLUG) stock forecast
Looking at both the price action and the company’s fundamentals, there seems to be enough evidence to support a bearish outlook for the stock, based on the company’s struggles to report positive top-line results along with the bearish momentum the price action is displaying.
This view might only be confirmed if the price moves below the $24 threshold, as that could lead to an accelerated downtrend.
This opinion is formed based on an analysis of the factors mentioned above, and should not be taken as a recommendation to invest in Plug Power stock.
Plug Power stock forecast for 2022–2027
Will Plug Power stock go up? Nobody can foretell with 100% accuracy whether the price of a stock will rise in the future. However, the algorithm-based Plug Power stock forecast made on 21 March by Wallet Investor for 2022–2027 said the price could be around $34.3 in a year's time. It suggested the stock could reach $79.4 byMarch 2027.
Analysts surveyed by TipRanks backed a positive Plug Power stock price forecast. As of 21 March, the stock got a “Strong Buy” smart-score rating based on "buy" investor sentiment from 10 analysts, with three further hold recommendations. Their higher estimate for the next 12 months is $78 and the lowest $21 with an average of $41.15.
Another algorithm-based service, Gov Capital, also shared a positive PLUG stock prediction. According to its data, the stock could be $38.8 this time next year and continue moving up to $93 in 2027.
Bear in mind that any analyst’s predictions or price targets could be wrong. Markets are volatile and the price of an asset can always go against you. We encourage you to do your own due diligence before making any trading decision.
Edited by Alexandra Pankratyeva
FAQs
Is Plug Power a good stock to buy?
Plug Power still has much to prove when it comes to the feasibility of its business model. In this regard, investing in this company is risky and may lead to losses if the firm is unable to live up to its promises. Moreover, based on an assessment of its fundamentals, Plug Power does not meet the criteria to be considered a top-value or growth pick.
How high can Plug Power stock go?
According to Wallet Investor’s Plug Power stock expectations, five years from now the stock could possibly surge to $93 a share based on an analysis of its current trend.
Should I buy Plug Power stock?
A decision to buy Plug Power stock should be made after performing a thorough due-diligence search on the company.
The opinions stated in this article should not be considered investment recommendations. Investors are encouraged to form their own opinion on the company before making a decision on whether to buy or sell this or any other stock.
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