Why This Plug Power Analyst Is Bullish On Hydrogen Stock's Growth Potential

Plug Power Inc.'s PLUG rich valuation is justified given the growth prospects, according to a RBC Capital Markets analyst. 

The Plug Power Analyst: Joseph Spak initiated coverage of Plug Power shares with an Outperform rating and $42 price target.

The Plug Power Takeaways: The opportunity for hydrogen is large, with the Hydrogen Council estimating the hydrogen economy could bring in over $4 trillion in annual sales by 2050, Spak said in the Wednesday initiation note. 

Plug Power's GenDrive has nearly 95% market share in fuel cell forklifts with customers including Amazon, Inc. AMZN and General Motors Company GM, the analyst said.

Fuel cell penetration within this market is still in its infancy and could increase as fuel cell forklifts can be competitive with traditional offerings and as customers look for decarbonization efforts, he said. 

Related Link: Plug Power's Stock Accelerates Through Resistance

Plug Power is looking to leverage its material handling fuel cell know-how to other end-markets, including stationary power and transportation, Spak said.

Through a series of acquisitions, the company is also looking to become a vertically integrated producer and distributor of hydrogen, the analyst said. 

"Essentially a one-stop hydrogen shop and accelerating expansion in green hydrogen generation is a key priority."

The company is also ramping up international opportunities and in regions where hydrogen may inflect faster than in the U.S., Spak said.

With $4.3 billion of cash on hand, Plug Power should have enough capital to get to self-funding, which would be a major catalyst, the analyst said.

Plug Power's valuation is rich, but is justified by a long runway for growth, he said. In the near-term, the stock will be driven by policy developments, new announcements, partnerships, or acquisitions and estimate revisions, Spak said.

PLUG Price Action: The stock was down 0.26% at $33.99 at last check. 

Related Link: Why This Analyst Thinks Plug Power Stock Deserves Elevated Valuation

Photo: a Plug Power truck.