Why This Is Our Top Energy Stock Of 2022Nov 24, 2021
Today we're updating our price target for Plug Power for a 3rd time!
When we first covered Plug Power back in September 2020 (see analysis here) we were truly excited about their future growth potential.
Fast forward to today & three price targets later - and only a fraction of that growth has been achieved and there's still a lot more to go!
Therefore, even with such a large run up in the last year, we still believe the stock still has a lot more upside to go.
Therefore, based off of our new analysis we're setting a price target!
Let's get into the details of why we think this will happen below:
Plug Power Overview:
As we mentioned last we wrote them up in June 2021 (see it here), Plug's hydrogen business was poised to absolutely boom over the next decade.
But since then not only does this still hold true, but their electrolyzer business is booming as well!
They're both booming so much so, that they're anticipated to exceed material handling revenues by 2024! This is a brand new projection.
And right now when you look at their business units, the bulk of their revenue is coming from material handling.
But due to the continued build out of their green hydrogen generation network they anticipate these sources to eventually exceed their core market of material handling as customers are looking for green hydrogen solutions.
This is so exciting because these green energy solutions come with higher valuation targets so that means for every $1 they make in these fields, the valuation associated with it is so much higher.
Therefore not only are they transitioning to a more sustainable business going forward, but it is also a business that investors love and value more!
So the reason this is causing us to increase our price target is because when we looked at their projected revenues last June, and when we look at them now, the upside has completely expanded!
Originally Plug Power called for $1.5 billion of electrolyzer and hydrogen production revenue & material handling revenue of $1 billion by 2025.
But after comments from their management team during Q3 earnings, not only is this expected to happen faster but these numbers could double by the year 2025!
And while the stock is up ~8% since then, insane projected growth like that has still not yet been priced in.
Therefore we are looking at a real opportunity to get serious upside on top of the already 200%+ growth we have since we entered the position last year.
When you factor in their recent acquisitions and historical performance, we are confident and think this upside (above what the market is anticipating) has an extremely strong chance of playing out.
If the above wasn't enough, Plug still has two more things going for them:
- Increased partnerships with many companies looking to leverage hydrogen first solutions.
- Higher than expected growth via their stationary power business unit. While this business unit is still young and small, the fact that management expects this segment to outperform signals good growth prospects further down the line.
Plug Power Investment Summary:
So when you combine:
- Significantly higher than expected revenue growth
- Revenue growth in high value business units
- Increased partnerships
- Historical outperformance
- And growth of new segments
you get a company that has a lot more upside to go!
It feels funny saying that because of their valuation right now, but not only is this sector trending amongst investors, but the upside for them is so insanely high.
What first was a Robinhood favorite stock in the beginning of the pandemic, has evolved into a company that has a strong outlook!
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Market Cap: $24B
Dividend Yield: 0%