Why This Analyst Thinks Plug Power Stock Deserves Elevated Valuation

Shares of hydrogen and fuel cell manufacturer Plug Power Inc. PLUG are trading well off the year-to-date high of $75.49 reached in late January.

The Plug Power Analyst: Roth Capital Partners analyst Craig Irwin reiterated a Buy rating and $65 price target on Plug Power shares.

The Plug Power Takeaways: Recent developments point to the  increasing probability of material green hydrogen catalysts, Irwin said in a Wednesday note.

The analyst said he's bracing for a potential green hydrogen offtake agreement from the company in the near-term.

The expectation is premised on the company's application for $520 million in funding from the federal government to support construction of five new green hydrogen facilities, he said. 

See also: How to Buy Plug Power (PLUG) Stock

"We expect Plug mgmt to be working fervently to lock in third party offtake agreements for Green Hydrogen, as this would offer a solid indicator of the true market value for Green Hydrogen and the potential for external sales versus internal consumption." 

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The Green Hydrogen Production Incentives Act being discussed in the Senate, if enacted, will provide a production tax credit for green hydrogen, giving a large possible benefit to Plug Power, Irwin said. Roth's $65 price target for Plug Power shares is based on a 60 times EV multiple on the firm's 2025 EBITDA estimate of $472 million for the company.

"We see the 60x multiple as fair since this result in 2025 should reflect an early stage of growth, where various market forecasts estimate 18% to 23% of world energy from hydrogen by 2050," Irwin said. 

PLUG Price Action: At last check, Plug Power shares were edging up 2.25% to $28.63.