Plug Power (NASDAQ: PLUG), a hydrogen fuel-cell specialist, saw its shares pop as it finished the day 13.3% higher as Morgan Stanley lifted its recommendation on the stock from Hold to Buy.
Tim’s Take:
In a recent report, Goldman Sachs calls it a “once-in-a-lifetime opportunity” that will have a total addressable market of a stunning US$12 trillion by 2050.
What is the bank referring to? Green hydrogen. With declining costs of production, along with hydrogen’s versatility as an emissions-free energy source, many investors are now starting to wake up and pay attention to this nascent corner of the renewables market.
Within the space, Plug Power is one of the leaders in hydrogen power technology. Traditionally, producing hydrogen has been costly given the energy-intensive nature of it.
However, with the advent of cheap renewables, that’s fast changing. It’s also perhaps why Plug Power, which has been public since 2002, has fared so poorly over the long term despite so many promising deals.
Green opportunities in hydrogen
Plug struck up partnerships with Walmart Inc (NYSE: WMT) and Amazon.com Inc (NASDAQ: AMZN), in 2014 and 2017 respectively, to supply forklift fuel cells for both retailers.
Despite some initial traction, the idea of hydrogen fuel-cells never took off given the cost and failure of widespread adoption. I believe that’s changing.
As the world shifts to figuring out ways to increase battery storage, there has also been space for hydrogen fuel to state its case for its storage capabilities while also being a carbon-free power source.
Plug, being the world’s largest user of liquid hydrogen, sees opportunities ranging from powering hydrogen fuel trucks in Europe to powering the vast amount of data centres that need clean energy.
What’s more, it also foresees huge cost reductions over the next five years as increasing scale and vertical integration start to make a difference (see below).
Source: Plug Power investor relations as of September 2020
Its most recent quarter saw the company deliver record gross billings of US$72.4 million while third-quarter guidance was set at US$110-115 million in gross billings.
As the company builds out its hydrogen power fueling stations and strikes up renewable energy partnerships, like the one it recently inked with Brookfield Renewable Partners (NYSE: BEP), the green hydrogen future is looking bright for Plug and its shareholders.
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Brookfield Renewable Partners LP.
