What happened

Plug Power (PLUG -4.56%) stock has kicked off August on a solid note, extending its gains from the end of July and surging another 19.9% this week through 10 a.m. ET Friday, according to data provided by S&P Global Market Intelligence. With this week's gains, the hydrogen fuel cell stock has now rallied a staggering 45% in just two weeks, as of this writing.

The tide is turning in favor of hydrogen stocks, even as Plug Power continues to receive attention from the analyst community just days ahead of earnings.

So what

On July 27, Democrat senator Joe Manchin surprisingly announced his support for the Inflation Reduction Act of 2022, which, among other things, proposes significant tax incentives on clean energy, including hydrogen. The bill includes a new production tax credit for hydrogen projects of up to $3 per kilogram of clean hydrogen produced after 2022 (subject to certain conditions, such as greenhouse gas emissions rate).

Since Plug Power delivers end-to-end hydrogen fuel cell solutions, from producing green hydrogen to delivering it to end consumers, the market sees this bill as a huge bonus for the company. 

Importantly, the proposals in the Inflation Reduction Act are similar to President Joe Biden's much-hyped Build Back Better plan, which triggered frenzied buying activity in clean energy stocks last year until the bill was shelved in December. With the Inflation Reduction Act now likely to pass into legislation, investor interest in Plug Power stock has shot up once again. 

Now what

Plug Power has ambitious plans. By 2025, it expects to produce 500 tons per day of green hydrogen and generate $3 billion in sales annually with a gross margin of more than 30%. To be sure, the company is building large plants and bagging deals regularly. For example, just this week, Plug Power announced an agreement with New Fortress Energy to build a 120-megawatt green hydrogen plant on the Gulf Coast that could produce more than 50 tons of green hydrogen per day.

This week, Northland analyst Abhishek Sinha also highlighted how Plug Power's strong balance sheet should support the company's growth plans. Sinha, however, sees execution risks ahead and therefore expects the hydrogen stock to perform in line with the market. He gave Plug Power a price target of $25 a share, which is where the stock is trading as of this writing.   

Whether Plug Power stock can sustain the rally, though, could depend a great deal on what happens on August 9, when the company will release its second-quarter numbers. Plug Power's first-quarter report was a bummer, and the consensus foresees steep losses for the second quarter. Focus, though, could be on its top-line growth -- last we heard, Plug Power expects to grow revenue by almost 80% in 2022.