Shares in US hydrogen fuel cell player Plug Power (NASDAQ:PLUG) have been having a good month of it. The NYSE listed stock was trading at $32.34 at time of writing, having bounced back from a level of around 25 bucks at the end of September. The $18bn market cap company is still a long way off its 52 week high however.
What has really got the investment community excited is news that it is working with Airbus (EADSY) on whether or not a hydrogen-powered plane is a viable idea. This is a major boon for the company, and also addresses a perennial issue within the commercial aviation industry, which is still a long way from addressing its carbon footprint.
The airline industry needs a planet friendly solution
Airbus is already working on more planet friendly concepts and we understand this is very high on the airline manufacturer’s priority list. Plug Power has already demonstrated that it can work to adapt fleets of trucks, but airlines will be a bigger challenge for the company. It will be working on deployment scenarios for green hydrogen infrastructure at airports. An as yet undesignated US airport will serve as the hub for a hydrogen infrastructure scale up by the two companies.
Plug Power said it was also looking at other joint projects as part of the partnership with Airbus.
The metrics behind Plug Power look good. Investors remain broadly positive on the story and the relative strength underpinning the stock is impressive to say the least. Where investors still need to be a little cautious are the financials, but you see this a lot with pioneering clean energy companies.
Plug Power stock momentum picking up on Airbus news
The company announced Thursday that it was establishing long term guidance of $3bn in annual sales out to 2025. It also updated 2022 sales guidance to $825m, with 65% growth over 2021. It said it expected to have 500 tons per day of liquid green hydrogen capacity online by the end of 2025.
Hydrogen in the US is still a challenging sector, where production relies on natural gas and produces carbon emissions. Plus there’s the ongoing issue of high natural gas prices to consider.
Also powering the stock back upwards was the upgrade from Morgan Stanley. The bank upgraded Plug Power to overweight and set a price target of 40 dollars. We think that might be a tad conservative.
Plug Power remains one of the most closely followed stocks in the hydrogen sector in the US, and frankly is a flag bearer for the market. But it is still very much an experimental technology play despite its size – return on capital with this one is frankly unattractive. Investors will be hoping for more deals like the Airbus one to power the stock price higher.