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Where Will Plug Power Stock Be In 5 Years? (NASDAQ:PLUG) | Seeking Alpha

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I continue to assign a buy rating to plug power inc. (nasdaq: plug). I mentioned the 2022 outlook for the plug in my previous article written on January 14, 2022.

Reading: Will plug power reach 100

In the current article, I take a longer-term perspective and assess where I see the power of the plug five years from now, as well as reviewing recent metrics and highlighting near-term catalysts. Over the next five years, I expect solid revenue growth and improved profitability for Plug. this is because I consider the company’s management guidance for 2025 and consensus forecasts for 2026 to be reasonable based on what I see in the company’s current progress in various business areas. As such, I stand by my purchase rating for the plug.

connect key value metrics

To start, I review the key metrics associated with plug’s most recent quarterly financial results.

plug power revenue increased +13% quarter-on-quarter, from $144 million in the third quarter of 2021 to $162 million in the most recent quarter, as stated in the fourth quarter shareholder letter from 2021 of the company. plug’s fourth quarter results were +3% better than wall street analysts expected.

The company generated revenue of $502 million for the full fiscal year 2021. the midpoint of its 2022 revenue guidance of $900-$925 million was almost 1% higher than the seller’s consensus sales estimate (prior to Q4 results). release) of $906 million according to s& p capital iq. This brings plug one step closer to achieving its 2025 goal of generating a $3 billion top line.

On the other hand, I noted in my previous January 2022 update for plug power that “there is a strong possibility that plug revenue could surprise to the upside this year (2022), and the key driver is electrolyzer sales “. Encouragingly, electrolyser sales contributed more than 6% of Plug Power’s Q4 2021 revenue. plug noted in the company’s Q4 2021 shareholder letter that it “has won 16 projects (electrolyzers) in 13 countries to date.”

on the other hand, plug’s fourth quarter 2021 net loss per share of -$0.33 was much wider than the final market consensus forecast of -$0.11 per share. but there are two key factors that support an improvement in the profitability of closures in the future. First, Plug Power should benefit from positive operating leverage as its revenue grows. Second, Plug mentioned in its Q4 2021 investor call that the company’s services business will grow rapidly with the expansion of its green hydrogen network this year and that this business segment has the potential to achieve a margin of 30% gross profit for next year.

what should plug catalysts pay attention to?

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In the short term, there are two key catalysts to watch.

A catalyst is the new hydrogen supply contract announcements.

On April 19, 2022, Plug Power disclosed that it entered into “an agreement with Walmart Inc. (WMT) to have the option to deliver up to 20 tons per day of liquid green hydrogen to power material handling forklifts.”

There are several signs that more of these hydrogen supply deals will be announced in the coming months. In its press release revealing the Walmart deal, Plug emphasized that the deal with WMT is “one of the first green hydrogen supply contracts” for the company. On the company’s fourth-quarter earnings call, Plug Power noted that “the sales funnel for that (hydrogen supply) is about 600 tons per day.”

As plug unveils new hydrogen supply deals, it will give the market greater confidence that plug energy can meet its 2025 target of reaching 500 tonnes per day of green hydrogen production.

another catalyst is the flow of positive news regarding the change in energy policies of countries favoring renewable energies or, more specifically, hydrogen-based fuels.

As an example, a news article searching for alpha on March 23, 2022 cited a keybanc sell-side research report that highlighted that “china revealed a plan to increase hydrogen production to reach 100k -200k metric tons/year” in 2025 as compared to the country’s current hydrogen production rate of “33 metric tons/year”. keybanc named plug as one of the main beneficiaries of China’s new hydrogen targets, as plug power has the “largest supply of green hydrogen products today”.

the war between russia and ukraine is a key event that has highlighted the importance of energy security and has pushed the governments of several countries to accelerate their transition from fossil fuels to renewable energy. As such, the news flow about other countries expanding their hydrogen production will also be a key catalyst for electric power, in addition to new hydrogen supply contract announcements.

where will the electricity supply be in 5 years?

See also: Sales growth rate: Calculation growth strategies

plug power reiterated its 2025 forecast of “$3 billion revenue” and “20% ebitda” margin at the company’s business update conference call in late January 2022.

Investors are confident that Plug can meet its 2025 goals, as evidenced by consensus financial forecasts from Wall Street analysts. The 2025 consensus sales top line and EBITDA margin for Plug are $3.01 billion and 19.2%, respectively, according to data from S& p capital iq. Sell-side analysts expect Plug Power to further grow revenue to $4.032 billion and expand its EBITDA margin to 22.3% in FY2026. This translates to CAGR of revenue for FY2022- 2026 of +52% and an expansion of the EBITDA margin of +17.9% points between FY2023 and FY2026 (the cap is still expected to generate losses in the EBITDA level in FY2022).

There are several metrics that support meeting management guidance by 2025 and achieving seller-side consensus numbers by 2026.

First, plug noted in its Q4 2021 shareholder letter that it is “three years ahead of schedule in securing five pedestal customers by the end of 2021.” this makes it more likely that electric power will be able to meet its goal of generating $1 billion in material handling revenue by 2025, which is about a third of its overall goal of $3 billion by 2025.

Secondly, the electrolyser business is growing rapidly. plug power has “a 155 mw electrolyzer backlog for delivery in 2022” which does not include “a 250 mw order from fortescue (otcqx:fsumf) (otcqx:fsugy)” as stated in its quarterly letter to shareholders more recent. therefore, it is reasonable to assume that plug is in a good position to achieve the 1 gw end-2022 electrolyzer build target it set in the previous January 2022 business update conference call.

Thirdly, the plug’s target green hydrogen production of 500 tons per day in 2025 appears to be achievable. plug power has a substantial “sales funnel” for hydrogen supply and recently announced a key deal with walmart as I mentioned in the previous section.

In short, Plug Power will be a much larger company in terms of revenue five years from now, and is also expected to deliver decent profitability by then thanks to greater economies of scale.

Are the plug-in actions a buy, a sell, or a hold?

In my opinion, plug stocks are still a buy. I believe Plug Power is still on track to meet the company’s fiscal 2025 financial goals, based on several metrics I’ve tracked and highlighted in this article.

See also: Why Haven Healthcare Failed

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