Plug Power (NASDAQ:PLUG) stock made waves on Wallstreet last year, posting an impressive 538% gain. However, in 2021 the company has struggled to maintain this growth, now down 23% YTD. In saying this, Plug Power does offer investors a unique investment opportunity within the hydrogen energy industry. Plug’s sheer operating scale makes it the largest liquid hydrogen consumer in the world. Plug Power stock has been strongly influenced by Wallstreets bullish movement towards the next generation Hydrogen economy. Moreover, the hydrogen economy could provide $2.5 trillion in direct revenues in 2050 according to the Bank of America. So let’s breakdown what analysts are saying about Plug stock and analyse the companies forecasts moving into the new age of zero carbon energy.
What are analysts saying about Plug stock?
The average 12 month price target for PLUG stock is currently $49.94 a share, up from $37 a share in January. To put the bullish sentiment shift into perspective, since our last article on PLUG in August the average price target from analysts has increased by 300%. We rarely see analysts update their 12 month price targets this consistently.
Price Targets from Institutional Analysts
Evercore ISI 4/19/2021 – analyst James West and Andres Menocal initiated coverage with a price target at $42 a share, an upside potential of 52% from its current trading price. The company also has an overweight rating on Plug Power stock. This was a positive note for investors.
Morgan Stanley 4/19/2021 – analyst Stephen Byrd reiterated the firms price target at $35 a share, an upside of 25%. Morgan Stanley holds an equal wight rating on the stock.
JP Morgan Chase & Co 3/30/2021 – analyst Paul Coster upgraded Plug Powers stock rating to Overweight. Coster set the 12 month price target for Plug Power at $51 a share, suggesting an upside potential of 82% from the current trading price. The overweight rating and bullish price target illustrates the firms bullish positioning on Plug Power stock.
Truist 3/23/2021 – analyst Tristan Richardson dramatically lowered the companies price target coverage from $80 a share to $42. Truist currently maintains a Hold rating on Plug Power stock. The catalyst of the downgrade was Plug Power’s announcement regarding re-stating their financial statements from 2018-2020.
“We have been generally constructive on the company’s fundamental outlook long-term… (But) following these disclosures we expect limited opportunity for outperformance in the near-term.” said Richardson in a note to investors.
How did Plug Power perform in the current quarter?
Firstly, Plug Powers annual performance saw the company post a negative revenue of $100 million. Now you may ask how this is possible? Plug Power had issued certain warrants in the past to customers as a rebate of sorts. These warrants let customers of Plug Power such as Amazon and Walmart, execute PLUG stock at a very low price (locked in price) compared to its current valuation. Now the value of these warrants has far exceeded the purchases made by Plug Powers customers due to the sheer growth in the stock price. This results in a negative revenue from an accounting perspective. This Nasdaq article goes into more detail regarding the warrants issued by Plug Power.
Plug Power also reported record gross billings last year, with $96.3 million in Q4 and $337.4 million annually. The company also noted their strong balance sheet position, with over $5 Billion in Cash. The cash position will allow Plug to execute its global growth strategy to be the leader in the emerging hydrogen economy.
However, these results may be subject to change as Plug Power is required to release updated quarterly earnings from 2019-20 due to errors in non-cash items on the balance sheet. The company has stated the revenue/billings outlook will not be impacted by the revised earnings statements. For more information regarding the current concerns surrounding the results see here. This news had a negative impact on the share price however PLUG stock has also been negatively impacted by a wider market tech sell off.
What are the revenue forecasts moving into 2021 and beyond?
Revenue forecasts from analysts look steady moving into 2021. The average revenue forecast for Plug Power in 2021 is $472 million according to Yahoo Finance data. In addition, Plug Powers revenue is expected to grow even further to $733 million in 2022. The long term revenue expectations from analysts remain positive. By 2024, PLUG is expected to post $1.7 Billion in annual revenue.
The Q2 2020 results also affirmed the revenue guidance for 2024, increasing their expected operating income to $200 million and an adjusted $250 million EBITDA. In contrast, the EPS predictions for 2021 are conservative, with an expected improvement of 17% YOY however this is subject to change upon further guidance.
What’s in the pipeline for 2021 and beyond
During the height of the pandemic, Plug Power moved 30% of the retail food and groceries in the United States, assisting retail giants such as Walmart, Amazon, Kroger, SuperValu, Wegmans, and Aryzta. The scale of PLUG is impressive, especially if you dive deeper into its vertical integration strategy. Plug Power has been able to concrete its roots deep into the Hydrogen industry, through acquiring their main hydrogen suppliers.
- Plug Power and Bae Systems enter a strategic framework agreement to develop Hydrogen powered electric buses.
- Set to Build North America’s Largest Green Hydrogen Production Facility in Western New York.
- Plug Power and Universal Hydrogen have further extended their partnership to enable Universal Hydrogen to complete the construction of a subscale aircraft powertrain by Q2 2021. The companies also agreed to a global offtake relationship that will see green hydrogen become cost-competitive with jet fuel by 2025.
“With the acquisitions of United Hydrogen and Giner ELX, Plug Power is now positioned to be a global leader in generation, liquefaction and distribution of green hydrogen fuel”
In conclusion, there is no doubt Plug Power stock has received bullish sentiment from analysts and smart money institutions. However the sustainability of Plug Powers short term momentum remains up for debate. The negative revenue result and surrounding lawsuits regarding earnings discrepancies has seen the stock drop as low as $20 a share. Long term investors will key in on the industry growth and any guidance changes as they approach 2024.
Written by Tyger Fitzpatrick at Youth Investment Group
Disclosure: The author of this article has a long term position in Plug Power stock at the time of writing.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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