Plug Power Stock Spikes Post Amazon Deal
August 29 2022 - 4:27AM
Finscreener.org
Shares of hydrogen and fuel cell
solutions company Plug Power (NASDAQ:
PLUG) rose over 9% on Thursday, pricing the stock at
$30. Plug Power stock rose after it announced a partnership with
e-commerce heavyweight Amazon (NASDAQ:
AMZN).
According to the terms of the
partnership, Plug Power will supply Amazon with 10,950 tons of
green hydrogen each year to power the latter’s trucking fleet and
fulfillment center equipment. The agreement is likely to deliver
power that will allow Amazon to operate 800 long-haul heavy-duty
trucks and 30,000 forklifts.
Kara Hurst, vice president of
Worldwide Sustainability at Amazon, stated, “Amazon is proud to be
an early adopter of green hydrogen given its potential to
decarbonize hard-to-abate sectors like long-haul trucking, steel
manufacturing, aviation, and ocean shipping.”
A deep dive into the Amazon-Plug Power
partnership
Plug Power delivers fuel cell
solutions for supply chain and logistics applications, in addition
to electric vehicles and stationary power markets in North America
and other international regions. It aims to build an end-to-end
green hydrogen ecosystem that includes the production of green
hydrogen, storage & delivery, and energy generation.
Plug Power emphasized its deal
with Amazon validates its ambitious growth strategy. The two
companies could also expand the partnership to add other
hydrogen-powered applications such as power generation stations or
fuel-cell electric trucks.
In the last 12 months, Plug Power
generated revenue of $600 million and is on track to
grow sales by 81.9% to
$914 million in 2022. Plug Power expects to hit $3 billion in
annual sales by 2025, and the Amazon partnership will act as a key
driver for top-line growth in the future.
Additionally, the venture with
Amazon should accelerate Plug Power’s goal of producing 500 tons of
liquid hydrogen each day by 2025.
Amazon also received a warrant to
buy up to 16 million shares of Plug Power. It can purchase 9
million Plug Power shares at an exercise price of
$22.9841.
Plug Power and Amazon have
partnered since 2016, when the tech giant deployed 15,000 fuel
cells to replace forklift batteries at multiple distribution
centers. Now, Plug Power is looking to gain traction by expanding
its hydrogen application portfolio.
Is Plug Power stock a buy right now?
In Q2 of 2022, Plug Power
increased sales by 21% to $151.3 million. But it ended the quarter
with a negative gross margin of 21%, which was narrower compared to
its margin of -32% in the year-ago period. It also reported a net
loss of $173 million, an increase of 73% year-over-year.
In addition to revenue
projections of $3 billion, Plug Power expects gross margins to
exceed 30% by 2025. During the company’s Q2 earnings call, CEO Andy
Marsh explained Plug Power expects a “boom” in the green hydrogen
and electrolyzer segment due to the Inflation Reduction Act
announced recently.
According to Plug Power, the
clean hydrogen production tax credit of $3 per kilogram of green
hydrogen produced after 2022 under the act may increase cash flows
by $500 million each year when its production levels reach 500 tons
per day.
Plug Power stock is valued at
$17.36 billion by market cap, valuing the company at 19x sales,
which is quite steep for a loss-making entity. Despite its sky-high
valuation, analysts remain bullish on PLUG stock and expect it to
gain over 20% in the next year.
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