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Why Plug Power Stock Jumped 19% Today

By Neha Chamaria – Aug 10, 2022 at 12:45PM

Key Points

  • Plug Power's second-quarter earnings report was a bummer.
  • The hydrogen fuel cell company, however, sees stronger growth ahead backed by the Inflation Reduction Act.

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The hydrogen stock is on fire as investors overlook its latest numbers and pump big money into the company's growth prospects.

What happened

Plug Power's (PLUG 2.98%) stock shot through the roof this morning, surging a whopping 18.7% at its highest point. As of 1:07 p.m. ET today, the stock was still up 16.69%.

It appears the markets reacted to the hydrogen fuel cell specialist's second-quarter numbers, released yesterday after market close. Ironically, Plug Power missed analysts' estimates on both its top and bottom lines, and there were no surprises in its full-year guidance, either. In fact, Plug Power's numbers look so dismal that any other stock would have crashed after such an earnings report.

Yet, something the company said caught investors' attention, and several analysts were quick to bump up their price targets on the hydrogen stock today.

So what

Here are some numbers from Plug Power's Q2 earnings report that you must know:

  • Revenue was up 21% year over year to $151.3 million.
  • Negative gross margin was 21%.
  • Net loss was up 73% year over year to $173 million.

Growth stocks are expected to grow revenue at a faster pace, and a negative gross margin could indicate Plug Power's inability to keep a check on production costs.

That said, Plug Power reported an even bigger negative gross margin of 32% in the year-ago quarter, and it still expects to grow revenue by nearly 80% to $915 million at the midpoint this year.

So what set its stock on fire today? Three things.

First, Plug Power said it now has a "clear path" to its 2025 goals of hitting $3 billion in annual revenue with a gross margin exceeding 30%.

Second, on its second-quarter earnings call, CEO Andy Marsh said the company expects a "boom" in its green hydrogen and electrolyzer business thanks to the Senate's passage of the Inflation Reduction Act this week. Plug Power estimates the clean hydrogen production tax credit of $3 per kilogram of green hydrogen produced after 2022 announced under the legislation could add $500 million in incremental cash flow every year at the company's targeted production 2025 level of 500 tons per day.

Third, several analysts upgraded their price targets on Plug Power stock today based on its robust backlog and the growth potential under the Inflation Reduction Act, among other things. Some of the analysts and their new price targets on Plug Power stock include:

  • BMO Capital's Ameet Thakkar: $29 a share.
  • Susquehanna's Biju Perincheril: $35 a share.
  • J.P. Morgan's Bill Peterson: $32 per share.

Now what

By now, it is evident what happened with Plug Power stock today -- investors paid little heed to its numbers and bet big on the Inflation Reduction Act, which includes spending $369 billion on climate change initiatives. Focus is, of course, on clean energy, which includes green hydrogen and is why investors have been loading up on Plug Power stock while they still can.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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