Alternative energy play Plug Power (PLUG) just struck a big new deal, and that’s sending the company on a nicely upward track.
The size — and potential impact — of that deal is drawing new investor attention. The company jumped 6.6% in the premarket on Tuesday, and kept those gains rolling into Tuesday morning’s trading session.
I’m bullish on Plug Power, because a deal like the one it just struck just might be the start of something great for the company. If it can play its cards right from here, it might be able to make itself a major player in its market.
Last April, the company struggled to break the $30 mark in closing prices. It managed to do so in June, October, and just about two weeks ago. Each time, however, the break didn’t last and the company retreated back into around the mid-$20s range.
The latest news may be just the catalyst Plug Power needs to get back above $30 and stay there for longer than a few weeks. Plug Power set up a deal with Walmart (WMT) to provide the company with liquid green hydrogen.
The deal will help further Walmart’s goal of becoming a zero-emissions company by 2030, and the hydrogen will be used to power Walmart’s forklifts.
Wall Street’s Take
Turning to Wall Street, Plug Power has a Moderate Buy consensus rating. That’s based on eight Buys and three Holds assigned in the past three months. The average Plug Power price target of $39.09 implies 39.1% upside potential.
Analyst price targets range from a low of $21 per share to a high of $78 per share.
Mostly Good News for Plug Power Owners. Mostly.
Looking at issues of ownership in Plug Power stock reveals quite a bit of good news, with one major exception: hedge funds.
The TipRanks 13-F Tracker reveals that hedge funds cut their ownership of Plug Power stock nearly in half from September to December 2021. In September, hedge funds owned just under 1.266 million shares. In December, that number dropped to 674,160 shares. This was after hedge funds more than doubled their ownership from July 2021’s figure of 518,328 shares.
However, hedge fund sellers found plenty of willing buyers. One point came from insider trading. Buyers have routinely led sellers for the last year at Plug Power, with only three total selling transactions filed since May of 2021. Meanwhile, 44 buying transactions have been recorded in that same time span. Nine of them showed up just last month.
Retail investors are also buying in on Plug Power’s future. Portfolios holding Plug Power stock increased 0.4% in the last 30 days, and 0.4% in the last week as well.
A Halo Effect?
This is a very big deal for Plug Power. It wasn’t exactly a well-known company before. Supplying Walmart with hydrogen improves its odds of being much more noticeable in the field.
Moreover, how long before those companies in Walmart’s competitive envelope are looking into their own deals with Plug Power?
After all, no one’s going to want to let a potential competitive advantage go unseized. That’s particularly true considering how hotly competitive the physical retail market is these days.
Plug Power’s chief energy officer Sanjay Shrestha — who also serves as the company’s general manager of energy solutions — noted that a growing green hydrogen network will likely be met by further demand for green hydrogen. However, Plug Power will have to step up production to meet such a demand.
This isn’t even the first bit of good news that Plug Power has received so far. The company recently landed a string of tax breaks to help it offset costs on its new $93.5-million factory in New York. Options traders are flooding in, which could mean a further advantage for Plug Power stock going forward.
Concluding Views
There’s a lot to like about Plug Power. The company’s product is proving attractive. So too is its stock. There’s also a clear opportunity for growth in share prices. The company is trading well below its average price target.
It’s a bit above its highs, which limits growth potential somewhat. However, it’s only a limiter of total growth, as opposed to a limit on the likelihood of any growth.
If Plug Power can parlay its new status as a Walmart supplier into further deals, this is likely to prove welcome for the company and its investors.
Of course, it’s also going to have to put a lot into building its ability to produce. That’s going to be a limiter on profits, and the chances of a dividend for investors.
However, reinvesting in the company has often proven a catalyst for explosive growth. There’s a lot of room for big gain at Plug Power, and this might just be the start of it all.
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