Roaring Kitty's return to the social media platform Reddit inspired a surge in meme stock prices on Monday, and it's looking like Plug Power (PLUG) stock is a prime beneficiary of the turnaround. Share prices of the forever-unprofitable hydrogen fuel cell company rose by double-digit percentages Monday, approaching consensus targets of about $3 a share.
However, one analyst thinks Plug Power could go even higher.
Before Monday's rally, TD Cowen's Jeffrey Osborne trimmed his price target for Plug stock to $5 a share -- a downgrade of sorts, but one that still implies Plug Power could soar 34% over the next year.
Is Plug Power stock a buy?
Plug Power reported a $0.46-per-share loss last week on a 43% year-over-year decline in revenue, results much worse than Wall Street expected. Operating costs fell as well, but not as fast as revenue -- only 29%. As a result, Plug's net losses ballooned 43% higher year over year.
Miserable news all around. But if that's the case, then why does Osborne say Plug Power stock will go up?
Last month, Plug announced its new hydrogen fuel plants in Georgia and Tennessee were operating at full production capacity, and its Louisiana plant is "on track" to hit this mark in the third quarter. Plug is therefore producing about 25 tons per day (TPD) of liquid hydrogen fuel today, and is on course to grow to 40 TPD over the next five months. Osborne cites this 40 TPD number as key to his buy thesis, anticipating that new revenue from hydrogen fuel sales at higher prices, when combined with cost-cutting, will yield better profit margins for Plug this year.
That may be the case. (It's hard to imagine Plug's margins getting worse). But even so, I have to say this buy thesis doesn't make much sense. Plug will expand production, and prices will go up? That's not usually the way economics works, and it doesn't sound like a business plan that would increase the popularity of switching to hydrogen fuel, either.
To me, this makes Plug Power stock a long-term sell.
