The market did not seem very pleased with Plug Power’s (PLUG) latest business update. Shares took the down escalator after the company reiterated its 2022 revenue guidance of $900-925 million.
While investors might have been showing their disappointment the company did not boost its forecast, Oppenheimer’s Colin Rusch sees plenty to back the bull case.
“We believe PLUG’s strategic update clearly signals the company’s maturation,” the 5-star analyst said. “With a balance sheet that still boasts ~$4.5B in cash, a talented management team, a material advantage in hands-on experience, and leading technology, we believe PLUG is executing capably against a large opportunity.”
Rusch is particularly pleased with the recent $30 million acquisition of natural gas conversion specialist Joule, which via the savings on the electricity costs for operating its hydrogen liquifiers, appears to pay for itself. It also presents the company with an opportunity to generate $250 million in incremental revenue over the long-term.
In fact, by as early as 2023, PLUG expects the “pipeline for electrolyzer capacity” to overtake its traditional material handling business. With the company set on producing 70 tons/day of green hydrogen by the year’s end, in-sourcing H2 procurement is “expected to drive a step-change in fueling margins,” which the Joule acquisition further supports.
Not that PLUG is resting on its laurels where the core material handling business is concerned. The company is continuing to grow its core business with the revenue guidance of $600 million for FY22 factoring in three new “pedestal” customers. The figure forms the basis for 2025’s outlook of $1 billion in material handling revenue, amounting to ~4.5% market share.
Like other growth-minded names, the stock has had a rough start to 2022 – shares are down 23% so far – but while Rusch concedes that “pressure on high growth names remains in the markets,” the analyst believes PLUG is “continuing to de-risk its business while driving toward sustainable FCF.”