Shares of Plug Power (PLUG) continued to rise in pre-market trading on Tuesday as the hydrogen fuel cell company is expected to benefit from the new hydrogen tax credit rules. The Treasury Department issued pivotal rules to incentivize companies making clean hydrogen, a fuel that could turn some of the world’s most polluting industries “green.” These new guidelines could provide a much-needed tailwind for emerging players in the hydrogen industry like Plug Power and Bloom Energy (BE).
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Clean Hydrogen Faces Promising yet Tough Path
Clean hydrogen has long been hailed as a potential game-changer in the energy sector. It could become an important energy source to power vehicles and replace natural gas in heavy industries. However, the development of this clean fuel has proved to be a challenge and has been hindered by inefficiencies and high costs.
Currently, the vast majority of hydrogen is produced using natural gas, a process that generates substantial carbon emissions. The Biden administration’s new rules aim to address this issue by offering tax breaks to companies that either capture and store carbon emissions from hydrogen production or use clean electricity, such as wind, solar, or nuclear power, in the process.
JP Morgan Analyst Sees New Tax Credit Rules Boosting PLUG
Following the announcement of the new hydrogen tax credit rules, JP Morgan analyst believes that that these rules are in line with the rules that the company had long advocated for. Furthermore, the analyst noted that the rules “will remove a longstanding overhang” for Plug, potentially accelerating its recovery.
Despite securing high-profile customers like Walmart (WMT), Plug Power has struggled financially in recent years, grappling with losses tied to its hydrogen supply contracts and costly efforts to scale up its production. The company is now trying to close a conditional government loan guarantee that could stabilize its finances, providing the lifeline needed to capitalize on the new regulatory landscape.
The analyst has a Hold rating on PLUG stock.
Is PLUG a Good Stock to Buy?
Analysts remain sidelined about PLUG stock, with a Hold consensus rating based on five Buys, 10 Holds, and three Sells. Over the past year, PLUG has declined by more than 20%, and the average PLUG price target of $2.76 implies a downside potential of 12.4% from current levels.
