Plug Power (NASDAQ:PLUG), which develops hydrogen and fuel cell energy solutions, experienced a 20% stock surge last week after the Federal Energy Regulatory Commission (FERC) blocked Amazon Web Services from using a nuclear power option.
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This decision has spotlighted alternative energy sources like fuel cells as viable solutions. While AI holds tremendous promise to reshape the future, its progress is constrained by significant energy demands needed to power data centers. These energy requirements remain a key limiting factor, pushing megascalers to explore innovative energy solutions.
However, the recent surge comes after a challenging year for Plug Power, which has seen its stock decline by 56% in 2024. Progress on hydrogen projects industry-wide has faced numerous financial, regulatory, and technical setbacks, including PLUG’s $290 million development in New York that was slated to be the largest in North America.
As a result, PLUG’s quarterly revenue growth has gone from black to red, while the cash on its books has evaporated from over $1 billion last year to a paltry $62 million.
Adding to these difficulties, investor Dilantha De Silva warns that the political shift in the White House will make things even tougher for PLUG going forward.
“The election of Donald Trump poses significant risks to the renewable energy sector, potentially impacting Plug Power’s growth plans,” the investor opined.
De Silva anticipates that a Trump administration may adversely impact renewable energy investments by pulling out of international agreements, promoting fossil fuel development, and rescinding unspent renewable energy funds allocated through the Inflation Reduction Act.
And yet, the investor is not ready to throw in the towel on PLUG, noting that the world will continue to look for clean sources of energy.
“The long-term outlook remains stable given the unified global effort to bring carbon emissions under control,” says De Silva.
Looking forward, the investor believes that PLUG could take advantage of “potential opportunities in the AI sector and partnerships with big tech.” This includes existing “high-value” customers such as Amazon and Walmart, which could propel the company into a market-leading position.
Therefore, De Silva still believes that PLUG could indeed deliver robust returns in the long term. However, the investor acknowledges that patience will be required, for now.
“Investors need to be cautious today given the many challenges looming on the horizon,” concludes De Silva, who is downgrading PLUG from a Buy to a Hold (i.e. Neutral) (To watch De Silva’s track record, click here)
The views on Wall Street seem to reflect De Silva’s lukewarm sentiment. With 5 Buy, 8 Hold, and 4 Sell ratings, PLUG claims a consensus Hold (i.e. Neutral) rating. However, like De Silva, there are hopes for a major growth spurt as its 12-month average price target of $3.97 would yield gains of ~100%. (See PLUG stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
