Fuel cells were once considered the future of transportation. They were just as green as electric vehicles except that they had longer ranges and charged much faster. Due to those advantages, numerous car companies spent a lot of time and capital to make fuel cell vehicles market ready. Plug Power (NASDAQ:PLUG) has also spent a lot of time and capital to make particular applications of fuel cell transportation cost effective. When it debuted, many investors were excited about PLUG stock.
Yet for all of the advantages that fuel cell cars have over electric cars, electric vehicles dominate in terms of absolute numbers of vehicles on the road.
The problem with fuel cell vehicles was that they cost a lot more than comparable electric vehicles. Due to the problem of hydrogen storage, producing a fuel cell car is very expensive. Meanwhile, the cost of electric vehicles is expected to be competitive with conventional gasoline powered vehicles as early as 2022.
Fuel cell vehicles also need infrastructure. Whereas electric vehicles can basically recharge anywhere there is an electric outlet, fuel cell vehicles need dedicated fuel cell recharging stations. Because there are very few fuel cell recharging stations, there has been low demand for fuel cell vehicles. Because there are very few fuel cell vehicles, there is no incentive to make fuel cell recharging stations.
Plug Power has survived in this tough fuel cell environment by specializing in one particular application of fuel cells — material handling. The company, in particular, created and leads the fuel cell material handling industry with over 25,000 GenDrive units shipped and over 80 hydrogen fueling stations built.
GenDrive is Plug Power’s hybrid electric fuel cell solution for forklifts.
In terms of material handling, time is money and much faster recharging times make hybrid fuel cell solutions more cost effective in that niche than pure electric alternatives. The infrastructure problem is also solved as a distribution center will automatically have both recharging stations and fuel cell vehicles.
While the PLUG stock price is up nearly 70% year to date, here are three potential catalysts that could send Plug Power even higher.
More Contract Wins
More contracts mean more revenues and potentially higher cash flows. If Plug Power wins more contracts, its stock could rise. Plug Power stock soared when it scored a big contract with Walmart. The company’s stock surged again when it won a big contract with Amazon. If Plug Power wins more big contracts, the market could potentially react the same way in the near term. Given that over 20% of Plug Power’s float is short, the news of a big contract win could cause a short squeeze in PLUG stock as well.
Plug Power Beats Expectations
According to Plug Power’s May investor presentation, management expects gross billings of $235 million-$245 million and adjusted EBITDA to be positive for full year 2019.
The company also expects margin expansion in the material handling segment and expansion into the on-road vehicle market. If management offers a better outlook than its previous estimate and the market believes in that outlook, the stock could go higher.
Plug Power certainly has potential for revenue growth. Management estimates that the material handling servable market in North America is over $4.5 billion alone.
Overall, the company estimates that its total addressable market world wide in material handling is over $30 billion. If the company uses its R&D effectively and reduces the cost of producing fuel cell solutions enough, it could also potentially beat on the adjusted EBITDA guidance too.
PLUG Stock Breaks Out Technically
Finally, retail investors account for a large part of Plug Power’s investor base. Although many retail investors are fundamentally inclined, many others are technical. If Plug Power stock breaks out for technical reasons with some convincing catalyst, the buying could lead to more buying. And if that happens, the Plug Power stock price could rise in the short term.
As of this writing, Jay Yao did not hold a position in any of the aforementioned securities.
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