Plug Stock is a Buy, says Roth

Roth Capital Partners analyst Craig Irwin is holding steady on cleantech name Plug Power (Plug Power Stock Quote, Charts, News, Analysts, Financials NASDAQ:PLUG) ahead of second quarter financials from the fuel cell systems company. In a Wednesday report, Irwin reiterated a “Buy” rating on the stock and 12-month target price of $13.00, saying investors should prepare for some volatility ahead in shares.

Founded in 1997, Plug Power designs and manufactures fuel cell systems for the industrial materials handling market. The company is reporting its second quarter 2023 results on Wednesday after market close. 

The stock had climbed fast over the back end of 2020 and into 2021 but then almost as quickly dropped back to earth, going from a high of about $70 per share in January 2021 to around $15 by the end of 2022. Year-to-date, PLUS is currently down about 16 per cent.

“PLUG will likely report transitional 2Q23 results as management is looking to get the green hydrogen buildout and gross margin execution on track,” said Irwin in his report.

“We remain skeptical on near-term margin gains and model gross margins, EPS, and EBITDA below Street expectations. We expect successful green hydrogen plant commissioning and qualified LCFS plant scores to serve as positive catalysts, but these are most probably going to be back-end loaded,” Irwin said.

Irwin noted that during its June investor day presentation, Plug Power provided an update on its plans for producing 1.5 TPD in Europe by 2030 and that it was on track to reach 200 TPD of production by the current year-end and 500 TPD in the United States by 2025. 

“We expect the company will announce a fifth US-based plan by year-end to achieve its 500 TPD goal,” he said.

With the report, the analyst has left his financial model unchanged, calling for revenue to go from $701.4 million in 2022 to $1,350.0 million in 2023 and to $1,975.0 million in 2025. EPS is projected to go from negative $1.18 per share in 2022 to negative $1.09 in 2023 and to positive $0.25 per share in 2025. (All figures in US dollars.)

At the time of publication, Irwin’s $13.00 target represented a projected one-year return of 18 per cent.

“Shares of PLUG could see increased volatility due to the high valuation on 2025 estimates, where individual company and industry catalysts, and expectations around catalysts, can both drive material implied changes to long-term hydrogen economy scenarios,” Irwin said.