Clean energy stocks, including Plug Power (NASDAQ:PLUG), once soared to near all-time highs in late 2021. However, a significant decline in the sector has been witnessed due to lofty valuations and broader macroeconomic challenges. Plug Power’s stock price, in particular, has tumbled by approximately 90% from its all-time highs, resulting in a market capitalization of $4.53 billion. Furthermore, the stock has retreated by 40% year-to-date and 45% from its peak in July, presenting a potential opportunity for investors interested in renewable energy.
What is Plug Power’s Core Business?
Plug Power specializes in providing turnkey solutions based on hydrogen fuel cells (HFC), essentially pioneering the first commercially viable market for this technology. The company has deployed over 60,000 fuel cell systems for electric mobility, giving it a significant advantage as an early adopter. Notably, Plug Power stands as the largest purchaser of liquid hydrogen on a global scale and operates a hydrogen highway in North America.
The company’s focus lies in building a comprehensive hydrogen ecosystem that encompasses the production, storage, and transportation of liquid green hydrogen. These expansion efforts are expected to drive higher adoption rates, enabling Plug Power’s customers to achieve their sustainability objectives more rapidly.
Over the last decade, Plug Power has been consistently growing its revenue at an impressive annual rate of 40%. Sales have surged from $230 million in 2019 to over $700 million in 2022. However, the company has yet to achieve profitability, having reported cumulative operating losses of $1.7 billion over the past four years.
What Lies Ahead for Plug Power?
Plug Power remains committed to substantial investments aimed at expanding its manufacturing capabilities. In early 2023, the company announced the completion of a 350,000-square-foot fuel cell manufacturing facility in New York, reinforcing its presence in the clean energy sector. Plug Power has also made investments in hydrogen facilities across the United States and in international markets like Finland.
To fund its ambitious expansion plans and support its cash burn rate, Plug Power has raised equity capital multiple times, leading to a 15-fold increase in outstanding shares since 2013, reaching 589 million. As of the end of Q2, Plug Power had $1.1 billion in cash reserves, providing it with room for potential improvements in profitability and the realization of economies of scale.
A report from Precedence Research indicates that the green hydrogen market is poised to surpass $332 billion by 2032, with annual growth rates of 55%. In comparison, Plug Power is expected to witness a sales increase of 82.7% to $1.28 billion in 2023 and further growth to $1.95 billion in 2024. Projections also suggest a reduction in adjusted loss per share from $1.25 in 2022 to $0.54 in 2024.
Plug Power has conveyed its approach towards an impending “inflection point,” potentially resulting in positive gross margins over recent quarters. The company’s expanding product portfolio and technological capabilities are anticipated to open doors to new growth markets, with a sales target of $20 billion by 2030, compared to $5 billion by 2025. Moreover, Plug Power envisions consistent profitability by 2025, targeting a gross margin of 30% and an operating margin of 17%. By 2030, gross margins are forecasted to expand to 55%, with an operating margin of 20%.
What is the Target Price for PLUG?
Among the 20 analysts covering Plug Power stock, 11 suggest a “strong buy,” one recommends a “moderate buy,” and eight advocate a “hold.” The average target price for PLUG stock stands at $17.14, indicating an implied upside of 132% from its current trading prices.
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Author Faith Yakubu 
