Plug Power Has A Solid Base Of Support
The price action in Plug Power, Inc (NASDAQ: PLUG) has been as volatile as any stock in our coverage over the last year and, like some others, appears to be at or near its bottom. The price action is down nearly 80% since hitting its peak and, coincidentally, trading at levels the institutions once thought attractive. The institutions have been buyers for the last 11 quarters, but the peak of activity was in Q1 and Q2 of 2021, when the price action was near the levels it is today. And the institutions are still buying. Their total holdings are above 52% and growing, which should provide a solid base of support for this market, and Plug Power is a desirable name in green energy.
There are 18 analysts covering this green energy stock despite its small size, about a tenth the market cap of Tesla (NASDAQ: TSLA), and they rate it a sold Buy. The Marketbeat.com consensus rating is a moderate Buy that has held firm and steady for the last 12 months at least. The consensus price target, however, is trending lower but still offers ample upside for investors with even the low price target about 7% above the current price action. The consensus price target is down in all three comparisons but is still more than 100% above the current price, and the high price target offers another 100% on top of that. JPMorgan Chase (NYSE: JPM) is the last to lower its price target (while maintaining an overweight rating) but to $28 or about 75% above recent action.
Plug Power Expected To Grow By Double-Digits
The analysts have set a high bar for Plug Power, but we think the company should have no trouble clearing it. Although hydrogen is still lagging behind electrification in regards to the roll-out of green energy technology, it is gaining momentum. Recent contracts with facilities like Europe’s 2nd largest port promise to drive near-term results and long-term credibility for the company and its technology. The company is leasing land for a hydrogen production facility that is expected to produce 12,500K tons of hydrogen per year. As it is, the analysts expect about $165.60 million in revenue for the quarter, which would be a company record and up 32% from last year.
The real question, however, is about earnings. The company has been struggling with the margin over the past few years and may not be able to meet the analyst's estimates. Margins are coming under pressure due to rising natural gas costs, a source of hydrogen molecules for the company’s operations, and may not be easily recovered. Energy prices are down from their peak but not expected to fall significantly in the near to short-term without a major recession. However, the company is working to improve its systems, which may lead to a technological breakthrough. In that event, this stock could become a top player in the green energy market.
Short Interest Is High For Plug Power
The short interest in Plug Power isn’t phenomenally high, but 12% is high enough to guarantee a short-covering rally, if not a short-squeeze, given the right catalysts. The right catalyst could be the Q2 earnings report scheduled for early August, but we aren’t holding our breaths. While the revenue could easily outpace the consensus, the earnings could easily lag, which is not a compelling catalyst for us. If, however, the company can mitigate costs in a sustainable way, it might be time to plug into a few shares of this stock.