Plug Power (NASDAQ:PLUG) is among the electric vehicle stocks that have faced much of the recent market backlash surrounding technology valuations. With the EV space unplugged at the moment, some companies may be finding new homes at more palatable prices while others are simply recharging for the next leg up.
As a leader in EV infrastructure, Plug Power falls into the recharging group. When the dust settles on the EV selloff, look for this stock to surge ahead of the pack to new highs.
What are Plug Power's Growth Catalysts?
Few companies had a bigger year in 2020 than Plug Power. The stock's monstrous 973% return put it in the top 20 gainers out of nearly 6,000 U.S. common equities. What's the buzz all about?
Plug Power is one of the biggest innovators in clean energy. Its landmark hydrogen and fuel cell technology GenKey offers a productive, low-cost alternative to lead-acid batteries. As the first company to commercialize hydrogen fuel cell technologies, it powers electric industrial vehicles such as lift trucks commonly used in distribution centers. Plug Power's fuel cell engines power more than 20,000 forklifts for customers in North America and Europe.
And given the rise of e-commerce and the need for massive distribution centers this original business line has room to expand in current markets and in untapped international markets. A presence in Brazil, India, and Australia suggests these countries will be a big part of the next wave of growth.
The company's expansion outside of the warehouse environment and into the mainstream electric vehicle market is what really has investors excited. Its ProGen modular fuel cell engines are designed to be easily integrated into automakers' cars and trucks. This year Plug Power is launching a fuel cell vehicle pilot program that the EV world will be watching closely.
Outside of the automotive industry, Plug Power's fuel cell technology has potential in areas like air transportation, robotics, and stationary power systems. In the stationary power segment, fuel cell solutions serve as a cost-effective and environmentally friendly alternative to generators and other power backup systems. While much of the attention is on Plug Power's EV applications, stationary power products for data centers, telecoms, utilities, and railroad operators may be one of its best growth opportunities.
What are the Advantages of Fuel Cell Power?
The biggest benefit of Plug Power's technology is that hydrogen fuel cells don't produce the harmful emissions associated with other energy sources like diesel fuel and acid batteries. Since heat and water are the sole byproducts with hydrogen, it is considered a sustainable, zero-emission power source.
Given how much corporations are focusing on their sustainability policies, hydrogen fuel cell power is becoming a main part of their programs. Similarly, the increasing popularity of ESG investing makes Plug Power a popular name among environmentally conscious investors. In fact, Plug Power stock is frequently in the top holdings of many clean energy and ESG-friendly mutual funds and ETFs.
In addition to its clean nature, fuel cell power is more efficient than the traditional combustion engines found in non-EV cars. According to the U.S. Department of Energy, hydrogen fuel cells are about twice as energy-efficient. Their use in electric vehicles stretches the travel miles.
Relative cost becomes the next question. Although fuel cell batteries may cost more upfront than lead-acid batteries, they run longer and require less maintenance making them more cost-effective overall.
Is it a Good Time to Buy Plug Power Stock?
As the world continues to move towards a carbon-less environment, Plug Power's efficient, zero-emission power solutions will be in high demand. By 2024 Plug Power aims to have more than 500 refueling stations across the U.S. As this network gets built out, the company's cash flow should improve substantially.
Plug Power shares have retreated from their January 26th peak around $75. The volume on the way down, however, was benign compared to the volume that drove the big January run. This combined with the fact that the stock dropped well outside its lower Bollinger Band to a Relative Strength Indicator (RSI) below 30 suggests the selloff was overdone.
Sell-side analysts continue to view Plug Power as a must-have name in the EV space. Thirteen of 15 firms call the stock a 'buy' and several have price targets in the $80 to $88 range.
This week Plug Power will announce fourth-quarter performance and provide an updated outlook. While its bottom-line result will still likely be in the red, signs of continued progress towards profitability could energize the market and send Plug Power revving higher.
As the world heads towards a decarbonized future, Plug Power will be one of the key players to fulfill this vision. The stock's visit in the $40's may be short-lived as this long-term winner gears up for another powerful run in 2021.
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