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Clean energy stocks, such as Plug Power (PLUG), offer an attractive risk-reward profile to investors. These stocks were trading near all-time highs in late 2021, but have since fallen by a wide margin due to their steep valuations and macro headwinds.
In fact, Plug Power stock is down 90% from its all-time highs, valuing the company at $4.53 billion by market cap. Moreover, Plug Power stock is down 40% year-to-date, and 45% from its July highs alone - creating a potential opportunity to buy shares of this renewable energy name on the dip.
What Does Plug Power Do?
Plug Power provides hydrogen fuel cell (HFC) turnkey solutions, creating the first commercially viable market for the technology. The company has already deployed over 60,000 fuel cell systems for e-mobility, and benefits from a first-mover advantage. Additionally, Plug Power is the largest buyer of liquid hydrogen globally, and operates a hydrogen highway in North America.
Plug Power is focused on building a hydrogen ecosystem that includes the production, storage, and transportation of liquid green hydrogen. Its expansion efforts should drive adoption rates higher, allowing Plug Power customers to meet their sustainability goals faster.
In the last 10 years, Plug Power has increased revenue by 40% annually. Its sales have risen from $230 million in 2019 to over $700 million in 2022. However, the company remains unprofitable, and reported cumulative operating losses of $1.7 billion over the last four years.
What's Next for Plug Power Stock?
Plug Power continues to invest heavily to expand its manufacturing capabilities. In early 2023, PLUG announced the completion of a fuel cell manufacturing facility that spans 350,000 square feet in New York. The clean energy disruptor has invested in other hydrogen plants across the country, as well as in international markets, such as Finland.
To fund its expansion plans and support its cash burn rate, Plug Power has raised equity capital several times, increasing its outstanding shares by 15x since 2013 to 589 million. Plug Power ended Q2 with $1.1 billion in cash, providing it with some room to improve the bottom line and benefit from economies of scale.
A report from Precedence Research forecasts the green hydrogen market to surpass $332 billion by 2032, indicating annual growth rates of 55%. Comparatively, Plug Power is forecast to increase sales by 82.7% to $1.28 billion in 2023, and by 52.3% to $1.95 billion in 2024. Its adjusted loss per share is estimated to narrow from $1.25 per share in 2022 to $0.54 per share in 2024.
Plug Power has emphasized it is nearing an “inflection point,” allowing it to report positive gross margins in the last few quarters. Its widening portfolio of products and technology capabilities should allow the company to enter new growth markets and report $20 billion in sales by 2030, up from $5 billion in 2025. Plus, PLUG expects to generate consistent profits by 2025, with a gross margin of 30% and an operating margin of 17%. By 2030, the gross margin is forecast to widen to 55%, with an operating margin of 20%.
What Is the Target Price for PLUG?
Out of the 20 analysts covering Plug Power stock, 11 recommend “strong buy,” one recommends “moderate buy,” and eight recommend “hold.” The average target price for PLUG stock is $17.14, indicating implied upside of 132% from current trading prices.
