I’ve been bullish on Plug Power Inc (NASDAQ:PLUG) for a while now. And it appears that the rest of Wall Street is finally waking up to the company’s tremendous long-term growth potential.
PLUG stock was one of the best-performing tech stocks in 2020, exploding 956%. It seems that the momentum has carried on into 2021. The year has barely started, but, as of this writing, Plug Power stock is already up 38% year-to-date and 764% year-over-year.
PLUG stock has been on a tear because the company recently announced that it’s forming an alliance with South Korean industrial conglomerate SK Group. The deal, which is valued at $1.5 billion, will see Plug Power Inc sell 10% of itself to SK Group.
The deal has caught the attention of Wall Street, which is normally quite subdued about Plug Power. Three different analysts have provided one-year forecasts in the range of $52.00 to $60.00 per share.
Wall Street likes to play it safe though—and investors can sometimes be a little aggressive—so those forecasts are probably a little light. A one-year forecast of $67.50 for Plug Power stock seems more realistic.
Chart courtesy of StockCharts.com
PLUG Stock Overview
Plug Power Inc is a renewable energy company that provides hydrogen fuel cells that replace the conventional lead-acid batteries in vehicles powered by electricity.
The company’s fuel cells are used in everything from fork lifts, to small transit buses, to full sized buses, to semi-trucks. It also has lofty goals of powering aircrafts. (Source: “Welcome to the Plug Symposium,” Plug Power Inc, last accessed January 6, 2021.)
It takes a lot of hydrogen to fuel Plus Power’s green energy, which explains why the company is the largest buyer of liquid nitrogen in the world. Each day, Plug Power uses 27 tons of liquid hydrogen. By 2024, the company expects that its customers will use 85 tons of liquid nitrogen per day.
In 2019, Plug Power launched a five-year growth plan that targets revenue of $1.0 billion, $170.0 million of operating income, and $200.0 million of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2024.
To put that number in perspective, in fiscal 2019, the company reported full-year revenue of $230.2 million, an operating income loss of $50.0 million, and adjusted EBITDA of $9.2 million.
Strategic Alliance With SK Group
On January 6, Plug Power announced that it had plans to form a strategic alliance with SK Group, one of the leading South Korean business groups, to accelerate hydrogen as an alternative energy source in Asian markets. (Source: “Plug Power And South Korean SK Group To Form A Strategic Partnership To Accelerate Hydrogen Economy Expansion In Asian Markets; Plug Power To Receive $1.5 Billion Strategic Investment From SK Group,” Plug Power Inc, January 6, 2021.)
Through this partnership, Plug Power and SK Group intend to provide hydrogen fuel cell systems, hydrogen fueling stations, and electrolyzers to the Korean and broader Asian markets. In conjunction with this partnership, SK Group will make a $1.5-billion strategic investment in Plug Power.
In January 2019, the South Korean government announced the “Hydrogen Economy Roadmap through 2040” initiative. Goals of the plan over the next 20 years include producing more than five million tons of hydrogen fuel annually, putting more than six million hydrogen fuel cell cars on South Korean roads, and building 1,200 refilling stations.
“SK Group has an established strategy for building out the hydrogen economy in South Korea and beyond,” said Andy Marsh, CEO of Plug Power Inc.
The current relationship with SK Group offers immediate strategic benefits to Plug Power to accelerate its expansion into Asian markets – and is intended to result in a formal joint venture (JV) by 2022. Due to the complementary strengths in this partnership, we expect rapid growth and significant revenue generation from the joint venture that are incremental to our 2024 plan.
Record Third-Quarter Results
On November 9, Plug Power announced that its third-quarter net revenue increased 80% year-over year to $107.0 million. (Source: “Plug Power Reports a Record Third Quarter in the Company’s History,” Plug Power Inc, November 9, 2020.)
The company also reported that its gross billings increased 100% year-over-year to a record $125.6M, the highest quarterly gross billings in the company’s 22-year history. The gross billings were more than 10% higher than the previous guidance and represent growth of 106% year-over-year and 73.4% sequentially.
Plug Power raised its 2020 full-year gross billings guidance from $310.0 million to the range of $325.0 to $330.0 million.
The company reported a third-quarter net loss of $39.3 million, or $0.11 per share, compared to the third-quarter 2019 net loss of $18.1 million, or $0.08 per share.
During the 2020 third quarter, Plug Power deployed another record 4,100 fuel cell systems and 13 hydrogen fueling stations.
Plug Power Inc keeps chugging along, doing exactly what it said it would do. That is, significantly grow its U.S. business and make serious inroads into Europe and Asia.
The company’s new alliance with SK Group puts it well on its way to deliver its 2024 financial targets. Some believe that, by 2030, Plug Power will generate $7.4 billion in annual sales. All this is good news for Plug Power stock investors.