Plug Power: Creating the next generation of "green" transportationJun 25, 2021
The last time we recommend Plug Power the stock was trading at $13 and now it is trading at $33 (154% upside). Because the price of the stock absolutely sky-rocketed the last 6 months, we decided to go back to the drawing board to see if it warranted a higher price target. Our latest analysis led us to uncover some truly astonishing findings! We're really excited to share them with you below. These uncoverings all have massive implications for the company and the broader industry. Here are the things you need to know:
Plug Power is reinventing hydrogen based power. In the last 12 months alone they've accomplished amazing feats such as:
- Partnering with Linde to provide them the ability to use the hydrogen it generates to fuel their fleet of vehicles.
- Partnering with Apex to secure cheap US renewable power, several avenues of growth in Europe, and strong progress in their electrolyzer technology.
- Signing on massive clients such as Amazon and Walmart, who are significant purchasers of PLUG's forklift power system
- The list goes on...
But now they're back at it again. PLUG, during their recent earnings, announced that they signed GM (General Motors) as their next material handling pedestal customer! While we anticipated this may be in the works, the real surprise was when they also announced they signed on another major global car manufacturer (although they declined to announce who it was). Additionally they said they have several more strong suiters in the pipeline and that they anticipate signing on a few m0re before year end. The takeaway here is clear: PLUG is taking market share with the next generation of clean energy based cars. With this early traction, we believe this could be a major driver for their revenue growth going forward.
But wait, there's more!
PLUG also announced that they're expanding into the Aerospace sector. This is coming via a partnership with Universal Hydrogen to deploy a fuel cell-based hydrogen engine for commercial flights. This is one of the early applications of this new technology and is a first step in the right direction. While it'll likely take awhile for this to materialize, the important takeaway is that it will happen. By gaining traction early on in auto's and now expanding into aerospace, PLUG is making the bet that EV's will not be the only form of alternative energy sources for transportation.
While the future growth prospects are hard to deny, bears are pointing to what's happening here and now. Therefore let's dig into the financials to understand where they sit today.
- During their most recent earnings report, PLUG reported $72M in net revenue in the first quarter of this year. This is up since their last report of $67M in net revenue. 7.5% growth QoQ isn't "crazy" but is still very solid for a companies who's growth is all coming from future endeavors. Looking forward PLUG anticipates having these increase rapidly to the point of gross revenues being at $1.7B by 2024. They also said they believe margins will be close to 30% which is trending positively. Again these are years away but the point is there is an achievable number to get to over $1B in gross revenues within several years. This is extremely encouraging for growth investments like these.
- While costs are important for a scaling company, most growth investors can look past them if they're transitory. What we mean by that is that if investors are comfortable that PLUG can overcome/eventually scale past these costs, that they can live with it for now. So when we see a $12M gross loss (largely due to switching gas suppliers and increased raw costs - due to recent natural disasters) we believe these costs are short-lived and will come back to normal levels once the switching costs are fully absorbed and the supply chain resumes back to normalcy.
- Trading at a wide valuation, one could push back on the companies price tag as being way too expensive. Our take on this is two fold:
- 1) With high growth tech companies trending in the right direction over the last few weeks, if inflation truly is transitory, we could see this trend continue to our price target in the short term.
- 2) Over the long term, if PLUG starts realizing any of these expected revenues, investors will catch on and hop on the train. A long term growth play, it just takes one earnings report for the company to catch fire with faster than anticipated growth!
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Current Price: $32
Target Date: 9 Months