Why Plug Power's Lead In Fuel Cell, Hydrogen Space Could Create 'Outsized Winner'

Plug Power Inc PLUG shares are primed for further gains, according to H.C. Wainwright, which issued a new Street-high price target for the fuel cell manufacturer.

The Plug Power Analyst: Analyst Amit Dayal maintained a Buy rating on Plug Power and increased the price target from $60 to $85.

The Plug Power Thesis: Plug Power announced a second major partnership within the span of a week, cementing its position as the leading hydrogen and fuel cell play in the world, Dayal said in a Wednesday note.

The company forged a joint venture with Renault ADR RNLSY in France to achieve a 30% share of fuel cell-powered light commercial vehicle market in Europe, the analyst said. 

The partnership is driven by a favorable regulatory environment for non-ICE adoption in Europe, he said. 

A revenue contribution of around $10 million will materialize from the venture as early as 2022, with a more meaningful ramp taking place by 2024, Dayal said.

Related Link: Option Trader Bets $1.1M On Plug Power Following South Korea Deal

H.C. Wainwright raised its net revenue and EBIT estimates for 2024 from $1.7 billion and $347.9 million, respectively, to $1.9 billion and $418.1 million.

The contribution from the partnership will increase the company's revenue growth rate to a 10-year CAGR of 50%, the analyst said. 

"We believe with partners such as SK Group and Renault, the company essentially has state-level backing to accelerate hydrogen and fuel cell commercialization in Asia and Europe." 

Dayal also sees the possibility of the company entering into similar partnerships with heavy truck OEMs.

H.C. Wainwright said it expects hydrogen and fuel cells to take meaningful share of the energy and transportation markets over the next decade, and Plug's lead in the fuel cell and hydrogen space could make it an outsized winner.

PLUG Price Action: Plug Power shares were trading 6.26% higher to $70.15 at last check Wednesday.