Hydrogen can help wean the world off carbon-based fossil fuels. And if it does,
is one of the best plays on that shift. That’s the case RBC analyst Joseph Spak made this past week, launching coverage of Plug Power with a Buy rating. The stock finished the week at $32.46, up 1.92%.
That’s good news for Plug Power—though the stock (ticker: PLUG) reflects lots of good news already. The shares trade for about 18 times Spak’s estimate of annual sales. And while it is up only 1% in 2021, it zoomed 973% last year. “The market has looked to Plug as a proxy for hydrogen economy growth,” he says. “But the growth is significant, which helps justify the valuation.”
Source: The Hydrogen Council/McKinsey
Spak’s $42 target is based on projecting cash flows into the future, as well as a 35 times multiple on the $537 million in cash flow he estimates for 2025. Despite the lofty valuation, Plug is popular on Wall Street. With Spak’s Buy call, two-thirds of analysts covering the stock now rate it a Buy. At about $45 a share, the average price target is higher than Spak’s, though both figures imply healthy upside.
Stock and bondmarkets are closed in observance of Independence Day.
The Institute for Supply Management releases its Services Purchasing Managers’ Index for June. Consensus estimate is for a 63 reading, slightly lower than the May data, which was a record. The Services PMI has also had 12 consecutive monthly readings higher than the expansionary level of 50.
Read More: Making the Case for Hydrogen—and for Plug Power