Plug Power Stock Forecast: What to watch in 2022 (NASDAQ: PLUG)

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Summary in seconds

I am increasing my investment rating for the shares of Plug Power Inc. (PLUG) from a Hold to a Buy. My previous Plug Power tutorial article was published on September 30, 2021.

I focus on Plug Power’s prospects this year in this last article. I see increased revenue and smaller operating losses for PLUG in 2022, and its current valuations are attractive relative to its peers. That’s why I got bullish on the name.

Where is the PLUG stock going in 2022?

As 2022 approaches, PLUG stock is expected to generate higher revenue and smaller losses.

Market consensus sees Plug Power’s revenue increase by +80% YoY, from $499 million in fiscal year 2021 to $899 million in fiscal year 2022, according to Sell-side financial estimates from S&P Capital IQ. Wall Street also expects PLUG’s non-GAAP adjusted EBITDA losses to decline from -$180 million last year to -$17 million for the current year.

Sell-side analysts’ financial forecasts are in line with management’s guidance.

In the company’s newest Letter to shareholders Q3 2021, Plug Power pointed out that it was “increasing the 2022 revenue forecast given acquisitions and commercial traction to $900 million – $925 million.” The consensus sell-side revenue forecast for 2022 ($899 million) is at the lower end of the company’s forecast.

While PLUG did not provide EBITDA guidance for 2022, the company had previously set a target of achieving positive non-GAAP Adjusted EBITDA of $250 million in 2024. Wall Street’s consensus adjusted EBITDA estimate for 2024 is even higher at $320 million.

In my view, market expectations for revenue and EBITDA for Plug Power this year are realistic.

Connect the power supply indicated on the Call for Q3 2021 results that its expected revenues of $925 million (upper end of the forecast) for 2022 will include $600 million from material handling, $150 million from electrolyser sales, $100 million from mergers and acquisitions and $75 million generated by new markets.

PLUG recently secured five new customers for its material handling business, which it said was “well ahead of target” in its third-quarter shareholder letter. Furthermore, Plug Power has ventured into the chlorinator sector by mid-2020 when it acquired Giner ELX, which it refers to as a company with “one of the most experienced teams in the world in the field of proton exchange membrane (PEM) electrolysis”. PLUG is targeting electrolyser sales above 100 MW to support its electrolyser revenue forecast of $150 million.

Inorganic growth and new markets are also key drivers behind Plug Power’s expected +80% revenue growth this year. Plug Power acquired Applied Cryo Technologies on November 23, 2021, which it describe as a “provider of technologies, equipment and services for the transport, storage and distribution of liquefied hydrogen”. PLUG subsequently completed the acquisition of Frames Group on December 9, 2021, referred to as “a leader in turnkey system integration for the energy industry” in its Press release. Additionally, Plug Power has found new commercial applications for what it refers to as its “NextGen platform of modular fuel cell engines”, according to the table below.

New market applications for PLUG

New market applications for PLUG

Plug hole

In terms of operating loss reduction, the main driver is Plug Power’s indication that “hydrogen costs in the fourth quarter of 2022” are expected to be “more than 20% lower than in the fourth quarter of 2021”, as indicated in its third quarter 2021 shareholder letter. During its third quarter 2021 earnings briefing, PLUG also noted that “we expect to have approximately four of these hydrogen plants in service” by end of 2022. This explains why a “significant improvement in margin from the fourth quarter of this year (2021) to the fourth quarter of 2022” is expected.

Should the stock of PLUGs increase?

PLUG’s stock price is expected to rise in the near term, as there is a high likelihood that the company will raise its revenue guidance for this year again soon.

As previously reported, Plug Power’s stock price hit a new five-month high of $44.55 on November 19, 2021. This happened 10 days after PLUG published its third quarter 2021 results and increased its revenue guidance for 2022, as discussed in the previous section.

There’s a good chance PLUG’s revenue will surprise on the upside this year, and the key driver is electrolyser sales.

Plug Power noted on the company’s third-quarter investor call that its 2022 electrolyser revenue “could be higher” than its current forecast of $150 million. The company’s confidence in a higher-than-expected Electrolyser rests on its knowledge of “deal flow and activity that we have going on,” according to its comments during the recent Q3 briefing.

Specifically, PLUG revealed earlier in mid-October 2021 that it “signed a letter of intent for a 50-50 joint venture to build a Gigafactory in Queensland, Australia” with “Fortescue Future Industries Pty Ltd”. As this transaction has not been finalized, it has not yet been factored into Plug Power’s 2022 revenue forecast of $900-925 million and electrolyser sales of $150 million. dollars.

What is Plug Power Stock’s price target?

Plug Power last traded at $23.91 as of January 13, 2021. Wall Street analysts’ average target price for Plug Power is $46.63 at the time of writing, suggesting upside potential. +95% capital appreciation for the company’s stock, which appears to be supported by relative PLUG valuations.

On a relative valuation basis, Plug Power’s consensus multiple of 8.8x enterprise value to revenue for fiscal 2023 is the lowest among its peers, despite the fact that its planned expansion of the revenues and gross profitability over the next two years are comparable to those of its peers.

Peer Review Comparison for Plug-In Power

Store One-Year Consensus Multiple of Value to Company Revenue Two-Year Consensus Multiple of Value to Company Revenue Year-over-year revenue growth rate consensus Consensus on two-year revenue growth rate One-Year Gross Profit Margin Consensus Two-Year Gross Profit Margin Consensus
Plug hole 12.8 8.8 +80.2% +52.4% 15.1% 21.7%
FuelCell Energy, Inc. (FCEL) 12.2 10.1 +109.9% +20.9% 9.4% 14.0%
Ballard Power Systems Inc. (BLDP) 17.7 12.2 +24.7% +53.2% 18.4% 20.9%

Source: S&P Capital IQ

In conclusion, I think there is a significant advantage for PLUG at current price levels. Plug Power should be able to see an expansion of its enterprise value to revenue multiples until at least its mid-teens, for a business growing in revenue by more than +50 % and shows signs of improving profitability.

PLUG Stock is it buy, sell or hold?

PLUG stock is a buy, as its valuations should be reassessed based on rising sales and narrowing EBITDA losses this year. A near-term catalyst is a potential increase in the company’s fiscal 2022 revenue forecast coupled with higher-than-expected electrolyser sales related to the proposed joint venture with Fortescue Future Industries.

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