Much to Like but the Risk/Reward Is Balanced

There’s a lot to like about the progress being made at Plug Power (PLUG). The hydrogen fuel cell specialist has a growing list of big-name customers, including Amazon, Home Depot, Walmart, and General Motors with a 5th marquee name expected to be added shortly.

Over the past year, the company has also expanded its global reach and now has joint ventures (JVs) with South Korea’s SK Group,Renault and the Spanish renewable energy producer Acciona.

It’s a big change, says Piper Sandler’s Pearce Hammond, which with the addition of $5.1 billion in accessible cash/restricted cash/marketable securities, leaves the company “well capitalized to fund its growth initiatives.” As such Hammond is more “comfortable with the company’s revenue trajectory.”

“Previously we were taking a cautious approach towards PLUG’s revenue targets,” the analyst further said, “But recent quarterly performance has tracked well against our model, increasing our conviction that the company will be able to hit these revenue targets.”

What this all means is a change to Hammond’s revenue estimates. The FY21 revenue forecast moves up by 4% from $468 million to $488 million – higher than PLUG’s guidance of $475 million. Additionally, the FY22 revenue estimate is increased by 8% from $704 million to $762 million, also above the company’s guide for billings of $750 million.

That said, higher G&A is anticipated due to PLUG’s hiring of additional staff during the recent financial restatement undertaking and Hammond also expects an uptick to R&D estimates, which results in operating margin estimates moving lower. The previous forecast had -16.5% operating margins for FY21, but these have now been changed to -24.3%.

Looking ahead, Hammond still expects operating margins to “inflect from negative to positive in 2023.”

And while the analyst also believes the company is “better positioned” than Ballard Power Systems – the other hydrogen fuel cell company under his coverage – the risk/reward for PLUG right now is “balanced.”

Accordingly, Hammond reiterated a Neutral (i.e., Hold) rating on PLUG shares along with a $32 price target. The rating might be subdued, but there’s 23% upside from current levels. (To watch Hammond’s track record, click here)

The rest of the Street’s take is a positive one. Based on 10 Buys vs. 4 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. The average price target stands at $43.60, suggesting shares will appreciate by 62% in the year ahead. (See PLUG stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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