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Hydrogen fuel cell company Plug Power (PLUG) is kind of a funny company. Owing to accounting quirks, the "gross billings" it highlights in its earnings reports don't always match up with actual revenues as calculated according to generally accepted accounting principles. As a result, despite a big jump in revenues last quarter, Plug Power is a company still sporting $5.5 million in "negative revenues" on its income statement.
But perhaps not for long.
Evercore analyst James West made the case for why Plug Power could "outperform" the stock market and hit share prices of $42 or even higher -- as high as $64 a share -- within a year, in response to new "infrastructure" legislation that is working its way through Congress. (To watch West's track record, click here)
As you've probably heard, this legislation comes in two parts, a $1 trillion infrastructure bill that has already been passed by the U.S. Senate, and a bigger $3.5 trillion "social infrastructure" bill that is being considered by the U.S. House. In his report, West sketched out why either or both of these bills could be a really big deal for Plug Power investors. Let's start with the $1 trillion infrastructure bill, the one that's already got one vote behind it, and the one that in West's view has the best (65% to 75%) chance of eventually being signed into law by President Biden.
If passed, this bill would direct "nearly $10B of funding... towards clean hydrogen research, development, and demonstration projects spent across 2022-2026," says West. It would also create a U.S "National Hydrogen Strategy" that West says "could prove a boon for the sector." Although "$8B of the $10B would go towards regional hydrogen hubs... the bill allocates $1B to a clean electrolysis program" such as Plug is planning for the production of green hydrogen, and the goal is to get this fuel's cost down to $2 per kilogram by 2026.
In contrast, the larger $3.5 trillion social infrastructure bill "is a longer shot," warns West, who gives it only a 30% to 40% chance of getting signed into law in its current form. But it would be even more beneficial to Plug and its green hydrogen plans, because it mandates that "hydrogen production facilities... have emissions 60% lower compared to an emissions-intensive natural gas steam methane reformation plant." This bill would also allocate $3 per kilogram subsidies to green hydrogen production, which West calculates could reduce the market cost of green hydrogen to as little as $1 per kilogram "in areas abundant with renewable energy," probably making the fuel instantly competitive with gasoline.
What does all this mean for Plug investors? According to West, if the $1 trillion infrastructure bill is the only one that passes, this would still be enough of a boost to help lift Plug to $9 billion in revenues by 2030, justifying a $42 price target on the stock. If the $3.5 trillion social infrastructure bill passes as well, West says investors can anticipate a $64 share price. (See PLUG stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.