What happened

Investors in hydrogen fuel cell pioneer Plug Power (NASDAQ:PLUG) enjoyed a terrific Tuesday as a pair of new acquisitions, coupled with a promise of increased revenue in 2024, helped the company power to a 15% gain for the day.  

Wednesday is looking pretty propitious for Plug as well, as analysts race to jump aboard the train, sending Plug stock up another 16.5% through 11:40 a.m. EDT trading.

Cartoon fuel cell car on palm of hand putting out H2 bubbles as exhaust

Image source: Getty Images.

So what

What exactly are the analysts saying today? So far, TheFly.com is tracking three separate Wall Street analysts raising their price targets in response to Plug's raised guidance:

The Street's optimism begins with B. Riley FBR, which raised its target price to $8 a share (Plug currently costs $7 and change), saying the company's acquisitions of United Hydrogen and Giner ELX give Plug a chance to "capture the entire hydrogen value chain" and offer it the opportunity to expand out of the material handling business into commercial vehicles.

Roth Capital soon seconded that, predicting that "a material fuel cell trucking announcement happens soon" and doubling its price target to $12 a share.

Analyst H.C. Wainwright is most optimistic of all, saying that with United Hydrogen now in-house, Plug will become one of the largest hydrogen suppliers in the world. It predicts Plug stock goes to $14 within a year.

Now what

Are the analysts right? Let's review what Plug management told us on Tuesday. Bad news first:

Plug is spending about $123 million in total to acquire both United Hydrogen (a hydrogen producer) and Giner ELX (a leader in electrolysis technology used by proton exchange membranes to convert hydrogen into electricity to power vehicles and machinery).

At least one of these acquisitions is being paid for through a mix of stock, assumed debt, and cash. It's hoped not too much cash, though -- because according to data from S&P Global Market Intelligence, Plug has only about $74 million in the bank. The more cash Plug lets go, the higher the company's $544 million debt load will grow -- not a good development in an economy mired in recession.  

Now the good news: Plug believes that with these companies under its corporate umbrella, it can vertically dominate the hydrogen fuel cell industry, from hydrogen production to operation of hydrogen fuel filling stations to production of hydrogen fuel cells turning that fuel into electricity powering machines and vehicles. With profit margins now more fully under its control, the company is predicting that by 2024, it will be doing $1.2 billion in annual revenue and earning $210 million a year in operating profit.

If Plug is right in these projections, that should work out to about $0.65 per share in pre-tax profit four years from now, which in turn means that, if you buy Plug stock for $7.50 today, you're paying only about 11.5 times pre-tax profit for the company, or about 15 times net profits (albeit profits that won't be earned for another four years). That still sounds like a pretty good deal if Plug hits its targets.

Now all we have to do is wait four years to find out if it does.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.