Plug Power At Crossroads: Where Is The Stock Headed?

Plug Power Inc. PLUG shares have not been immune to the market-wide downturn, having pulled back about 56% year-to-date.

What Happened:: Most sell-side analysts concur that the Latham, New York-based manufacturer of hydrogen fuel cell energy systems holds out much promise. The average analysts’ price target for the stock is $28.41, according to TipRanks, suggesting there exists over 125% upside potential.

See Also: Best Renewable Energy Stocks

Then, what’s ailing the stock? Is the economy and the Fed to be blamed as just Tesla CEO Elon Musk would like to think?

Plug Power is looking to be a one-stop shop and market leader in the hydrogen energy market, which is valued at $10 trillion by 2030, Manav Gupta, an analyst at UBS said in an initiation note.

The company’s businesses include developing hydrogen and fuel cell products to replace lead-acid and lithium batteries in electric vehicles and providing electrolyzers for clients to generate hydrogen onsite.

Third-quarter results released in early November showed 31% year-over-year growth and 25% sequential growth in revenue to $188.6 million. The topline growth, however, trailed expectations.

Looking ahead to 2023, the company forecast revenue of $1.4 billion and continued margin expansion. The company also reaffirmed its long-term revenue guidance of $5 billion for 2026 and $20 billion for 2030.

The Game Changer: Gupta sees the production tax credit of $3 per kg of green hydrogen as a game changer. The analyst sees this dramatically expanding the economics for green hydrogen, making it more economical versus grey hydrogen. Businesses that are making no material contribution at this time like green hydrogen will likely add over $750 million to sales by 2025 and electrolyzer sales will contribute over $900 million, he added.

In mid-December, Plug Power inked a deal with Nikola Corp. NKLA to supply the latter with green hydrogen, starting Jan. 1, 2023. The company sees volume ramping up to 125 tons per day.

As Gupta points out, the next three years could be investment-intensive ones for the company, necessitating capital spending in excess of its cash from operations. This will cease to be a concern, as new companies seek Plug Power’s assistance to build green hydrogen plans and its electrolyzers, translating to revenue for the company, Gupta said.

The market will be more than willing to look past near-term cash burn and focus on 2030 when Plug Power becomes a market leader in various segments, he added.

Stock Take: Plug Power shares took off in the middle of 2020, breaking out of a long-term consolidation phase and peaking at $75.49 on Jan. 26, 2021. The stock retreated shortly after and bottomed at $18.48 in mid-May 2021. Subsequently, the stock has been locked in a broad consolidation phase.

The stock’s recent downturn has taken it below support around $14. If it can bounce back, it may run into resistance around the $19 level. Further upward, it has another resistance around the $31 level — a level at which it completed a double-top formation earlier this year.

Chart Via Benzinga Pro

On the downside, it has support around the $9.30 and $5.50 levels. The relative strength index for the stock is at 37, suggesting oversold levels.

Price Action: Plug Power closed Thursday’s session at $12.55, up 4.05%, according to Benzinga Pro data.

Read Next: Why This Analyst Is Bullish On Plug Power