Near-Term Headwinds Won’t Derail the Bull-Case, Says J.P. Morgan

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The uncertain macro environment demands constant reassessment around companies’ anticipated performance.

Coming off the back of J.P. Morgan’s recent Energy, Power and Renewables Conference, firm analyst Bill Peterson notes that Plug Power’s (PLUG) management continues to see “significant seasonality” in the material handling and electrolyzer businesses.

This will nudge sales to the back half of the year and will result in a 35% – 65% split between 1H and 2H, which is “more back half-weighted” than Peterson’s previous estimates. As such, the analyst now sees Q2 revenue coming in at $146 million compared to $215 million beforehand (consensus estimates stand at $169 million). That said, Peterson’s full-year revenue expectations climb to $908 million from $905 million.

Additionally, given that supply constraints have not improved to any significant extent and natural gas prices “remain elevated” in the U.S., in the near-term, Peterson expects margin headwinds will keep on impacting Plug Power’s fueling and service businesses (especially fueling).

Post Q2, however, Peterson anticipates seeing “directional margin improvements” in service, while towards the end of the year, fueling should also improve, particularly as Plug’s 70TPD of green hydrogen comes online.

Despite the issues, overall, Peterson remains upbeat regarding the business, expecting PLUG to drive “strong revenue growth and profitability over the mid-term.”

“We think Plug largely remains on track to reach its revenue and profitability goals by scaling up its gigafactory, delivering leading electrolyzers, expanding product offerings, reducing fuel costs, and driving product cost-downs and reliability, among other action items,” the analyst explained.

Therefore, on account of the growth prospects, sound execution in the face of near-term obstacles, and “clear roadmap to scaling up revenue and improving margins,” Peterson maintains an Overweight (i.e., Buy) rating on PLUG shares. That said, the price target is lowered from $32 to $28, although the figure still makes room for one-year upside of 63%. (To watch Peterson’s track record, click here)

Those are some nice gains, yet the rest of the Street has higher expectations. The forecast calls for 12-month returns of 110%, considering the average price target clocks in at $34. Rating wise, most are running with the bulls too; with 11 Buys vs. 3 Holds, the stock boasts a Strong Buy consensus rating. (See PLUG stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.



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