Why This Plug Power Analyst Sees 61% Upside Potential

Plug Power Inc PLUG is a huge beneficiary of the thrust on the hydrogen economy amid the green energy drive, according to an analyst at Morgan Stanley.

The Plug Power Analyst: Analyst Stephen Byrd maintained an Overweight rating on Plug Power and increased the price target from $43 to $65, a 51% upward adjustment and suggesting a 61% upside from current levels.

The Plug Power Thesis: There is increasing confidence that Plug Power can grow its hydrogen production and electrolyzer businesses at a more rapid rate, aided by cost control and growing customer demand, Byrd said. The company is also poised to capture market share within these businesses, the analyst added.

"We see a 'virtuous cycle' forming in which Plug Power's cost reductions drive greater sales, which in turn result in greater scale and lower per-unit costs," Byrd said.

Plug Power is one of the best-positioned companies in the hydrogen economy, given its strong balance sheet, scale, and vertical integration strategy, the analyst said.

Related Link: Why Plug Power Analysts See A Margin Improvement Story With Outsized Growth Prospects

The management recently signaled significant upside within its electrolyzer and hydrogen production businesses, the analyst noted.

There was significant upside to the guidance management outlined at its Symposium back in mid-October, which included $1.5 billion of electrolyzer and hydrogen production revenue, combined versus material handling at $1 billion in 2025, Byrd said.

Accordingly, Morgan Stanley raised its cumulative revenue estimates for the period from 2022 to 2030 for the electrolyzer and hydrogen production segments by 131% and 86%, respectively.

For the stationary power business, cumulative revenue estimates were increased by 150%, but off a very low base, the firm added. The firm also increased its material handling estimates by 16%.

The new revenue estimates range between 30% and 65% above consensus in 2023-25, the firm said.

A higher growth level is achievable for Plug Power, given the increasing number of significant customer agreements, high hit rate with new target customers, M&A and management's hint at some very large incremental sales opportunities that could come to fruition in the near to medium term, Morgan Stanley said.

PLUG Power Price Action: In premarket trading, Plug Power shares were up 8.96% at $43.96.

Photo: Courtesy Plug Power