When it comes to the debate on hydrogen fuel cell maker Plug Power (NASDAQ:PLUG), it’s not about the company. It’s about the valuation of PLUG stock.
That is, hardly anyone would argue with much conviction or merit that Plug Power won’t grow by a ton over the next several years. That’s a forgone conclusion.
Plug Power will grow by leaps and bounds in the 2020s, as hydrogen fuel cells turn into a centerpiece of the “Green Economy” due to hydrogen’s scientifically unrivaled energy density and related benefits.
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We all know that.
What we don’t know is exactly how big that growth will be, and what it means in terms of how much PLUG stock is worth today. That’s where the debate begins — and it’s a very important debate, because the answer will tell us when this epic plunge in Plug Power stock will end.
The answer? Soon.
I have strong reason to believe that $30 will act as a solid floor for PLUG stock, and that buyers at these levels have limited downside risk exposure but enormous upside reward potential.
The Debate Over PLUG Stock
The PLUG stock debate is all about how much Plug Power will grow over the next decade and how much all of that growth is worth today.
Bulls say that Plug Power will turn into the technological backbone of a multi-trillion-dollar Hydrogen Economy, one day netting tens of billions of dollars in revenues and profits as it supplies hydrogen fuel cells for use in forklifts, trucks, ships and data-centers. Considering this potential to become one of the world’s leading green hydrogen producers, PLUG stock is worth more than $60 today.
Bears, meanwhile, believe Plug Power will have lots of competition for hydrogen fuel cells, which will see stronger-than-expected niche adoption thanks to technological advancements in lithium batteries. They say PLUG stock is worth about $10.
For what it’s worth, I think the bulls are right. As do most of the 12 Wall Street analysts covering PLUG. On average, Wall Street has a $60 price target on PLUG stock — and a lot of analysts have doubled down on their bullishness amid the recent market rout.
Regardless of who is right, PLUG stock may find its footing in the near-term at $30. If you are in the bull camp, the $30 level is a good level to pull the trigger on more shares.
Is $30 the Floor?
Back in early 2021, Plug Power stock was consolidating around the $30 range after a red-hot rally throughout 2020. Then, over the course of about a week, Plug Power announced two blockbuster partnerships — one with SK Group and one with Renault Group — the sum of which sent PLUG stock surging to $70 in no time.
All of those gains have since been wiped out. We’ve done a full round trip.
Typically, from a technical perspective, full round trips also mark bottoms. That is, now that PLUG stock is back where it was before this enormous rally, there’s reason to believe shares will continue the consolidation they were experiencing in early January.
It also helps that Plug Power has about $5 billion in cash sitting on the balance sheet. Around $30, the company is worth less than $20 billion. A 25% cash buffer feels sufficient to protect against much further downside risk.
Yet, in the event that the company continues to announce record growth over the next few quarters — which a recent partnership with the Alpine F1 Team underscores — then this stock could skyrocket back to $60 or higher.
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In other words, at current levels, I feel confident in saying that further downside risk is limited by technical factors and the strong balance sheet, while upside potential is enormous.
Bottom Line on PLUG Stock
The tech sector meltdown has created multiple golden buying opportunities. And PLUG stock is one such opportunity that ranks among my top “Green Wave” stocks to buy, but it’s far from my only pick.
The world’s energy production is pivoting to renewable sources of energy. By 2040, oil and gas will be relics of a world long forgotten, and we will live in a world powered by solar, wind and hydrogen.
My top hypergrowth stocks in this megatrend include the companies shaping this future with next-generation solar panels, AI-powered energy storage solutions and breakthrough hydrogen technologies.
Get the complete list of stocks to buy in the Green Wave megatrend by subscribing to Innovation Investor today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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