Why This Analyst Is Bullish On Plug Power

Plug Power, Inc., a 3Hydrogen fuel-cell energy company, has been making strides with its execution on all fronts.

The Plug Power Analyst: KeyBanc Capital Markets analyst Leo Mariani initiated coverage of Plug Power shares with an Overweight rating and $40 price target, suggesting more than 40% upside from current levels.

The Plug Power Thesis: Plug Power has a leading industry position as it has one of the largest scale businesses compared to its public peers, analyst Mariani said in a note.

The company is a dominant player in the material handling business with nearly 90% market share, the analyst said, citing data from the Fuel Cell & Hydrogen Energy Association. Plug Power's key customers for its material handling business include Amazon, Inc. AMZN, General Motors Company GM, Walmart Inc WMT and Home Depot Inc HD, he added.

Related Link: Plug Power Raises Revenue Guidance After Mixed Q3, Announces Frames Acquisition

Additionally, the company has strategic partnerships with major industry players such as SK Group in South Korea, Renault ADR RNLSY in France, Acciona SA ACXIF in Spain and Fortescue Metals Group ADR FSUGY in Australia that helps it gain a toehold into key growth markets, the analyst noted.

The company, the analyst said, is aiming for growing revenues at a 53% CAGR through 2024 and hopes to become profitable by then as well, and sees potential for $3B in revenue by 2025.

"Recent execution at PLUG has been solid a bit as the Company beat consensus revenue expectations in three of the last four quarters," the analyst said in the note.

Plug Power also has a strong liquidity position with around $3.5 billion in cash on its balance sheet as of Sept. 30, 2021, with much of it coming from a number of large equity financing deals over the last few years, the analyst noted.

The company may have to burn cash for at least the next several years to hit its aggressive growth goals and may need to eventually raise equity for its expansion plans, he added.

PLUG Price Action: Plug Power shares were down 5.97% at $26.47 Wednesday afternoon at publication.
Related Link: Why Plug Power Analysts See A Margin Improvement Story With Outsized Growth Prospects

Photo: Courtesy Plug Power