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Plug Power Could Become One of the Largest Green Hydrogen Suppliers Globally
Analyst Initiates Coverage with a Buy Rating
Citi analyst Vikram Bagri believes that Plug Power has the potential to become one of the largest green hydrogen suppliers globally. In a Wednesday note, Bagri initiated coverage on the company with a buy rating and set a price target of $13, indicating a 22.1% upside from the previous day's close. He highlighted Plug Power's early mover advantage, cutting-edge technology, and scale as key factors that position the company well to benefit from the growing demand for green hydrogen in hard-to-abate sectors.
Strong Presence in Material Handling Business
Bagri also noted that Plug Power has established its dominance in the material handling business, with nine publicly disclosed pedestal customers including industry giants like Amazon, Walmart, Home Depot, and GM. Additionally, the company is in discussions with two potential customers. Plug Power's strong foothold in this sector is expected to contribute significantly to its growth and profitability.
Positive Outlook for Margin Expansion
According to Bagri, Plug Power is on track to achieve positive gross margins this year and aims to surpass 30% in gross margins by 2026. The company's aggressive growth plans and substantial operating leverage are expected to drive strong margin expansion. Bagri also emphasized that Plug Power currently has enough cash and equivalents to support its organic growth until early 2025. However, he pointed out that the company's capital needs are significant and consensus estimates for capital need to be adjusted upwards.
Financial Support from Department of Energy
Bagri suggested that financial support from the Department of Energy could provide flexibility and help Plug Power with its margin expansion. He believes that a favorable guidance on additionality/time matching, progress towards gross margin improvement, and financial assistance from the DOE could act as positive catalysts for the company.
Despite its promising prospects, Plug Power's stock performance has been lackluster, declining almost 14% year to date and over 39% in the past 12 months. However, analysts like Bagri remain bullish on the company's future growth potential.
Conclusion: Potential Impact on New Businesses in the Green Hydrogen Sector
Plug Power's potential to become one of the largest global green hydrogen suppliers presents a significant opportunity for new businesses entering the sector. Analyst Vikram Bagri's buy rating and positive outlook on the company's growth highlight the favorable market conditions and demand for green hydrogen in hard-to-abate sectors. This indicates a growing need for innovative solutions and opens doors for new players to establish their presence in the industry.
One key area where new businesses could capitalize on Plug Power's success is in the material handling business. With its strong presence and partnerships with industry giants like Amazon, Walmart, Home Depot, and GM, Plug Power has demonstrated its ability to secure major customers. This presents an opening for new businesses to offer complementary products or services to support Plug Power's operations or to target smaller customers in the market who may be seeking alternative green hydrogen suppliers.
Additionally, Plug Power's positive outlook for margin expansion and the potential financial support from the Department of Energy offer further opportunities for new businesses. As Plug Power continues to grow, there will be a need for additional infrastructure, equipment, and technology. This creates a market for new businesses to provide the necessary resources or collaborate with Plug Power to enhance their operations.
While Plug Power's stock performance has been lackluster, this could be viewed as an advantage for new businesses looking to enter the sector. The current market conditions and the company's growth potential suggest that there is room for competition and a chance for new businesses to disrupt the market. By leveraging innovative approaches and addressing any gaps or challenges in the industry, new businesses can position themselves to make a significant impact and potentially achieve significant growth.
In conclusion, Plug Power's position as a potential global green hydrogen leader presents a window of opportunity for new businesses to enter the sector. By focusing on areas such as material handling, infrastructure support, and technological advancements, new businesses can leverage Plug Power's success and contribute to the growth of the green hydrogen industry.
Article First Published at: https://www.cnbc.com/2023/07/06/this-green-hydrogen-stock-can-rally-more-than-20percent-says-citi.html.svg)
