On September 30, BMO initiated coverage on Plug Power (NASDAQ: PLUG) with a $30 price target and market perform rating, saying that the company, “is strategically expanding its success in material handling to pave the way for the H2 economy.” They believe that PLUG is one of the better ways to get exposure to wind/solar alternate energy exposure.
The core thesis backing BMO’s initiation is that in order for Plug to be very successful, green hydrogen prices have to come down meaningfully, which means global wind and solar production must grow very very quickly.
Plug Power has 23 analysts covering the stock with an average 12-month price target of $43.06, or a 69% upside. Out of the 23 analysts, 5 have strong buys, 12 have buys, 5 have holds and 1 analyst has a sell rating on Plug Power. The street high sits at $78 from H.C Wainwright while the lowest comes in at $27.
BMO Capital believes that a clean hydrogen sector will be essential if the countries in the 2015 Paris agreement want to hit their emission reductions and believe it’s a matter of when not if one emerges. Plug Power has quantified this sector with an up to $10 trillion addressable market. With this, they believe that Plug is the best U.S-based company to gain exposure to the market. They estimate that the hydrogen market will satisfy between 10% and 20% of the total global energy demand by 2025.
With Plug Power’s track record, which shows that it can commercialize its PEM fuel cell technology, BMO believes that this is the key differentiator. They believe that PEM fuel cells will be the technology of choice by the emerging demand markets.
They write, “As countries, industries and companies race to comply with more stringent emission standards PLUG has and will continue to emerge as a partner of choice.” BMO also predicts that because Plug will already be selling their customers hardware, it will be easier to sell those same customers a suite of other products which will be another way to grow revenues.
However, BMO initiated coverage with a market perform since they believe that the industry costs for green hydrogen must come down 75% for it to become an attractive energy source. They also explain that hydrogen has a “chicken or egg problem.” In which, for there to be demand for energy, supply needs to be built first, but no one is willing to build supply if they cannot accurately quantify the demand.
Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
