While Plug Power (NASDAQ:PLUG) has been dealing with accounting issues discovered in previous financial reports, PLUG stock has fallen 63% from its $73.18 January high close. But with the earnings restatement posted, is now the time to make a move?
Plug Power has seen its shares punished over the past three and a half months. However, it is still one of the more compelling plays out there on a zero-emission transportation future.
Hydrogen fuel cells have big (and in Plug’s case, proven) potential in industrial and commercial transportation, where plug-in EVs simply aren’t practical. What Plug Power has been doing to ramp up its green hydrogen production capacity is what will really help boost its uptake going forward.
The Importance of Green Hydrogen
Green hydrogen is the “gold” standard when it comes to the use of hydrogen as a fuel.
There is plenty of hydrogen in the world. It’s one of the most common elements on Earth. But hydrogen doesn’t occur in nature by itself. It is always paired with other elements — such as oxygen (in water). The hydrogen has to be separated, and that takes energy. When fossil fuels like methane or natural gas are used in the process and carbon dioxide is released into the atmosphere, the end fuel is called gray hydrogen. When fossil fuels are used, but the resulting greenhouse gases are captured and stored, it’s blue hydrogen.
Gray hydrogen is not going to be acceptable under a zero-emission plan. Currently, it’s estimated that the global production of gray hydrogen is releasing more greenhouse gases into the atmosphere every year than the United Kingdom and Indonesia combined. Blue is seen as a stop-gap solution.
Green hydrogen, on the other hand, is produced by an electrolysis process that splits oxygen from hydrogen in water. The energy to do so is supplied by renewable sources like solar. It produces no pollution, just oxygen. Green is the key to moving the hydrogen economy forward.
Plug Power Doubles Down on Green Hydrogen
Plug Power is investing big time on green hydrogen and the market was happy to see it. PLUG stock popped 21% in the two days following the company’s February announcement that it will be building the largest green hydrogen production facility in North America. The $290 million facility will be built in New York. Plug says the plant will produce 45 metric tons of green hydrogen daily once fully operational. Along with the company’s existing Tennessee plant, that will ramp up to 500 tons of green hydrogen daily by 2025.
Long term and globally, Plug is looking at production of 1,000 tons daily by 2030. The company says it will be able to deliver this green hydrogen to its transportation fuel customers at prices comparable to diesel.
Bottom Line on PLUG Stock
If you’re looking for a way to take advantage of the accelerating move toward a zero-emission transportation future, Plug Power is well worth considering. This is a company with a long history — it’s no high-risk startup. It has a proven business model. It keeps landing big contracts and expanding its market. The company exceeded its 2020 revenue guidance, then boosted targets for 2021 and 2024.
In addition, the company is investing in green hydrogen infrastructure, paving the way for wide scale adoption of hydrogen fuel cells by the transportation and industrial markets as they look to go green.
Adding to the allure, PLUG stock has taken a hit in recent months, making it much cheaper.
An investment isn’t risk-free. For example, there is no guarantee we won’t see a future technological breakthrough that eliminates the charging time that currently plagues battery-powered EVs. In the short term, PLUG stock may still feel the effects of the accounting errors discovered earlier this year.
However, the long-term growth potential of this stock remains. PLUG stock earns a ‘B’ rating in Portfolio Grader. It gets an “Overweight” rating from the investment analysts polled by the Wall Street Journal. They have an average 12-month price target of $47.82, which offers considerable upside.
On the date of publication, Louis Navellier had a long position in PLUG. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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