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Valued at a market cap of $2.16 billion, clean energy company Plug Power (PLUG) delivers end-to-end hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, and others. PLUG is engaged in building a hydrogen-powered ecosystem that includes liquid green hydrogen production, storage and handling, transportation, and dispensing infrastructure.
Shares of Plug Power have surged more than 450% over the past decade. Despite these outsized long-term gains, PLUG is down 95% from its 2021 highs.
In fact, Plug Power stock fell over 40% in a single trading session on Nov. 10, after the company reported disappointing Q3 results and issued a “going concern” warning, which spooked Wall Street.
However, with CEO Andy Marsh doing the media rounds to reassure investors that the company is fundamentally sound - and on pace to shed the “going concern” label early next year - let’s see if it makes sense to own Plug Power stock at current levels.
Is Plug Power Stock a Good Buy Right Now?
Market valuations of many clean energy companies have experienced a freefall in the last 12 months. For instance, leading manufacturers of wind turbines and solar panels are wrestling with rising interest rates, inflationary pressures, and falling profit margins, while electric vehicle (EV) companies have been feeling the impact of an ongoing price war.
As for Plug Power, the company is wildly unprofitable, and reported a free cash outflow of $1.26 billion in 2022. To support its cash burn rates, Plug Power has raised equity capital several times in the past. The number of outstanding shares has risen by 15 times to almost 600 million, resulting in massive dilution of shareholder wealth.
During its earnings call, Plug Power emphasized it would have to raise additional capital to continue as a going concern. It also explained existing liquidity will not be enough to sustain operations in the next 12 months.
Since then, Marsh has downplayed the “going concern” language as an “accounting technicality," and played up his company's ability to generate capital.
"…[I]t really was just an accounting announcement that the company made. So, it's not that big of a challenge for us,” Marsh told Renewables Now. “I've got a USD 5 billion balance sheet that has no debt. Raising USD 500 million doesn't feel like a lot to get through the next year.”
The CEO added, “I could raise that kind of money in five or six days.”
What's the Long-Term Forecast for PLUG?
Plug Power has deployed more than 60,000 fuel cell systems for e-mobility and enjoys a first-mover advantage. It is also the largest purchaser of liquid hydrogen in the world.
In the past decade, Plug Power has increased sales by 40% annually. Its sales are forecast to touch $1.7 billion in 2024, up from $230 million in 2019.
The company believes it is close to reaching an inflection point, and forecasts sales of $5 billion in 2025 and $20 billion in 2030. It further estimates a gross margin of 30% and an operating margin of 17% by 2025. Moreover, gross margins should widen to 55% by 2030 with an operating margin of 20%.
Plug Power is part of a rapidly expanding addressable market, as the green hydrogen segment is forecast to surpass $134 billion by 2032, indicating an annual growth rate of 40.6%. But to take advantage of this massive opportunity, Plug Power has to expand its manufacturing capacity and benefit from economies of scale, which should boost profit margins.
What's the Target Price for Plug Power Stock?
Soon after Plug Power’s warning, analysts cut their ratings on the stock, which now has quite a few less “buy” endorsements than it did a few months ago. According to Oppenheimer, which downgraded the shares from “outperform” to “market perform,” the negative impact of hydrogen shortages and expected delays in Department of Energy (DoE) funding are points of near-term concern.
However, the consensus on Wall Street is still overall bullish on PLUG. Out of the 22 analysts covering Plug Power stock, six recommend “strong buy,” and 16 recommend “hold.” The average target price for PLUG is $8.18, indicating an implied upside of 131% from current trading prices.
