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Sport News | PLUG Stock has a bullish history but the gain is still years away

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PLUG Stock has a bullish history but the gain is still years away

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Plug hole (NASDAQ:PLUG) has been one of the most profitable, yet volatile, stocks over the past two years. This was fueled significantly by retail investors. The stock PLUG is a favorite among Robin Hood (NASDAQ:HOOD) investors.

Source: Alexander Kirch / Shutterstock.com

The company combines two elements that have been important to this new generation of investors. First, before the Covid-19 pandemic, PLUG shares could be purchased for less than $5 per share. Second, it’s a play about clean energy and climate change. At a time when alternative energy sources are becoming more viable, it makes sense for investors to consider Plug Power’s first-mover advantage in the hydrogen fuel cell market.

And if you bought PLUG stock five years ago, you’re getting a 1,775% return. That being said, PLUG stock is down 60% in the last 12 months. And the stock looks set to drop below what has been a strong support level.

In fact, as interest in Plug Power grows, it would seem that impatience about the company’s prospects increases. I keep seeing message boards advising investors to “know what you own”. But if investors really believe it, they know it might be a while before the PLUG action pays off.

E-mobility is a hard calculation

In the United States at least, electric vehicles (EVs) represent only a small percentage of the overall market. While researching for this article, I saw a source set the number to 1%. Another source referred to a Reuters study which put the number at 3%. That number jumps to 5% if you factor in hybrid models.

There are several reasons for this. But one of them concerns the company’s developments in battery technology and progress on a charging infrastructure. Nevertheless, a study of BloombergNEF predicts that global electric vehicle sales will reach 14 million by 2025. This is more than four times the 3.1 million sold in 2020. The same study predicts that electric vehicles will account for more than 60% of all vehicle sales. new cars in the world by 2040.

Plug Power is not targeting the passenger car market, but the commercial market and fleets. The same transition is happening in this sector. And this is where the math gets tricky for Plug Power.

A problem for Plug Power is not to prove that its technology works; this proves that the technology is a more cost-effective solution for battery electric vehicles. And today, it’s not even close to being more profitable. The problem is that fleet operators make decisions for today.

And most recently, the city of Montpellier, France canceled an order for 50 hydrogen fuel cell buses. The reason for this is that after analyzing the numbers, they realized that it would be around six times more expensive to run fuel cell buses than battery-powered electric alternatives.

Another advantage is that electric vehicles can operate for years. For example, “the useful life of an electric bus is about 12 years old. That means the orders Plug Power is losing today might not come back for a decade.

First-mover advantage can take time to pay off

Luckily for investors, Plug Power doesn’t rely on fleet sales as its sole source of income.

The company has invested heavily in electrolysers and green hydrogen. As global governments begin to back hydrogen solutions in the fight against climate change, this could be where the growth is coming from.

Expect PLUG Stock to Struggle in the Short Term

In the short term, I think PLUG stock will continue to struggle. The general market mood does not support risky stocks like Plug Power. However, Plug Power’s long-term story seems optimistic. And the analyst community agrees.

Currently, PLUG stock has a 12-month price target of $48.85. That’s impressive, but it’s really just a function of the stock’s price volatility. What’s more interesting is that over the past 12 months, the number of analysts covering the stock has increased, as has the number of buy ratings.

This is probably because institutional ownership is increasing. Over the past 12 months, institutional purchases have nearly doubled institutional sales. And nearly 50% of PLUG’s shares are held by institutions.

As of the date of publication, Chris Markoch had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Chris Markoch is a freelance financial writer who has covered the market for eight years. He has been writing for InvestorPlace since 2019.

PLUG Stock has a bullish history but the gain is still years away

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