Is Plug Power on the Rise?
Company Profile
Plug Power Inc. is an American company which provides hydrogen fuel cell solutions. Its head office is in Latham, New York and was founded as a joint venture between DTE Energy and Mechanical Technology Inc. The company went public in 2002. Plug Power focuses upon hydrogen and fuel cell systems that are used to power electric motors in the electric mobility and stationary power markets. It has deployed over 30,000 fuel cell systems according to S&P Global.
Source: Fingerlakes1.com
Most of the company’s products revolve around the proton exchange membrane (PEM) fuel cell and fuel processing technologies, fuel cell/battery hybrid technologies, and hydrogen storage and dispensing infrastructure. It obtains the hydrogen by purchasing it from fuel suppliers. Products and services provided to customers include : GenDrive, GenFuel, GenCare, GenSure, GenKey, and ProGen. According to its 10K report, these products provide the following:
The firm employs a strategy to grow and mature as a company. It consists of utlising its fuel cell application and integration knowledge to identify high asset utilisation markets in an increasingly electrified world. It also puts emphasis on its operations by having objectives such as decreasing product and servicing costs, expanding system reliability, and improving post sales support.
Industry Analysis
Hydrogen is light, storable, energy heavy, and does not produce direct carbon emissions or greenhouse gasses (GHG). It is likely to play a heavy role in clean energy transition with increase in its use in areas such as transport, buildings, and power generation. The industry still hasn’t gained as much traction as other renewable energy sectors have such as solar, wind, and nuclear. None, if not few policies have been passed to provide support to the growth of the energy type. With renewable friendly policies being enacted around the world, more attention will be given to hydrogen which signals potential in firms currently working on hydrogen solutions.
Hydrogen has many uses, and the World Energy Council believes its applications will vary in 2040 as per the chart above. Unlike other sources of renewable energy, hydrogen can be used in different sectors and for different things. For example, in countries such as Canada, solar or wind can’t heat homes during the winters. Either it must use renewable natural gas which still hasn’t gained much traction and is perhaps suffers from underinvest with only one major company being listed on any stock exchange (Greenlane Renewables) or continue to use fossil fuels. Hydrogen presents the perfect alternative, and its wide use will keep its relevance high.
Competitor Analysis
Plug Power beats most of its industry averages in the ratios listed above. All of its major competitors are unprofitable due to a lack of maturity in the industry. Companies are still working out how to bring cost saving synergies while benefiting from revenue synergies. This has caused firms like Plug Power to spend heavily on R&D. The lack of positive ROE and ROA figures also represents growth potential as these firms are yet to mature and can benefit from the rise in renewable energy. All of these stocks have had massive appreciation in its share price in the past year despite having some poor fundamentals.
Conclusion
Plug Power has a lot going for it. It operates in a high growth industry and has a lot of room to grow. With pro-renewable energy governments around the world, hydrogen will only grow in use. Firms like Plug Power which are already dominant in the space will only benefit. For these reasons, I believe Plug Power is a growth stock which will provide return on investment. In the worst case, it will increase 50% on its current price if it continues to be unprofitable, in the medium case, where current trends continue, it will appreciate to 100%, and in the best case with full policy support, it will appreciate to around $100 and higher in the coming 3 years.