DJ Plug Power Stock Is Rising. It's a Bet on a Hydrogen Network. -- Barrons.com
Al Root
Billions of dollars are poring into the hydrogen economy as costs come down, and as governments and companies commit to reducing greenhouse-gas emissions. Key to the success of the nascent industry is getting hydrogen gas costs down and competitive with traditional fossil fuels. Plug Power has a plan to do just that.
Citigroup analyst P.J. Juvekar visited Plug Power (ticker: PLUG) facilities and management recently and came away impressed with its plans to expand its hydrogen-gas-making capabilities and lower costs in the process. The bullish take on his recent meeting is helping shares Monday.
Shares are up 5% in midday trading, to $28.32. The S&P 500 is down about 0.2%, while the Dow Jones Industrial Average has added about 0.4%.
Juvekar rates Plug Power stock at Buy with a $35 price target.
Plug Power is a hydrogen technology company that sells forklifts powered by hydrogen. It also distributed hydrogen gas bought mainly from industrial-gas companies that manufacture hydrogen by breaking apart natural gas.
Hydrogen from natural gas is so called grey hydrogen because fossil fuels are used in it manufacturing. Processing or burning fossil fuels, such as natural gas, generate carbon dioxide, the main gas blamed for global climate change. Green hydrogen is produced by passing electricity, generated by renewable-power assets such as solar, through water to make hydrogen and oxygen gases. No carbon dioxide is generated in that process.
Down the road, Plug Power plans to generate its own hydrogen-gas supply using electricity. What's more, it wants to sell heavy-duty trucks powered by hydrogen fuel cells -- as trucking company Nikola (NKLA) plans to do.
Juvekar believes that Plug Power can make green hydrogen for about $6 per kilogram. A kilogram of hydrogen gas and a gallon of diesel fuel is roughly equivalent.
That's much more than diesel fuel costs today, but it is about the going rate for deriving hydrogen from natural gas. That means Plug Power can have a business even before it lowers hydrogen costs closer to what diesel fuel costs.
Plug Power is selling about 50 tons per day of hydrogen gas to its materials-handling customers, according to Juvekar. Plug Power is generating about 6 tons of that and buying the rest. Plug Power is planning to build enough capacity to generate 100 tons of hydrogen per day by the end of 2022. By 2025, Plug Power can be generating 500 tons per day.
"The proposed infrastructure bill is another positive for hydrogen and Plug," points out Juvekar in his Monday report. It includes $8 billion for hydrogen-production hubs and $1 billion green electrolyzer development between 2022 and 2026, adds the analyst. An electrolyzer is the equipment to split water into gases using electricity.
Juvekar calls Plug Power stock a high-risk investment. Shares trade at roughly 20 times estimated 2022 sales, and the company isn't profitable yet. But if the company gets costs right for hydrogen production, there will be sales growth, and a lot of gains for investors in coming years.
Plug Power stock is down 15% year to date. Still, share are up 146% over the past 12 months.
Write to Al Root at allen.root@dowjones.com
(END) Dow Jones Newswires
September 27, 2021 12:34 ET (16:34 GMT)
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