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In case you haven’t noticed, a whole lot of pain and pessimism has already been priced into Plug Power (NASDAQ:PLUG) stock. I’ve warned investors about Plug Power stock before. However, it’s been beaten down so badly that the risk-reward balance actually seems to favor the buyers now.
This isn’t just a “nowhere left to go but up” argument, though. There are actually recent news items that bode well for Plug Power. So, maybe it’s time to embrace the hate, make friends with the market’s pessimism and take a chance on Plug Power.
Plug Power’s Big Deals Are a Big Deal
Plug Power stock is down substantially year-to-date, as well as over the past 12 months and over the past three years. The share-price destruction may be overdone, however, since Plug Power has garnered some potentially lucrative contracts.
In particular, the company is establishing itself as a go-to source of electrolyzer systems. For example, Plug Power recently “secured an order for 25 megawatts of proton exchange membrane electrolyzer systems for a customer in Europe.”
Furthermore, this deal has the potential for expansion of up to two gigawatts of electrolyzer capacity.
That’s not the company’s only big contract. Plug Power recently closed a 3 GW Basic Engineering and Design Package contract with Allied Green Ammonia to establish an electrolyzer project in Australia.
Moreover, Plug Power has an “additional 4.5 GW of BEDP contracts spanning the U.S. and Europe.” Thus, the company has an impressive 7.5 GW of global BEDP contracts in total.
Plug Power ‘Intends to Benefit’ From Government Support
It’s difficult to predict what the U.S. government will look like in 2025. For the time being, though, it’s clear that the government supports hydrogen production and Plug Power in particular.
Notably, the U.S. Department of Energy’s Loan Programs Office offered Plug Power a “conditional commitment” for a loan guarantee.
This could be worth as much as $1.66 billion in loan funding to Plug Power, earmarked to “finance the development, construction, and ownership of up to six green hydrogen production facilities.”
Maybe Plug Power will actually receive $1.66 billion in loans, or maybe not. Yet, there’s more to the story, as Plug Power “intends to recognize the benefits of” the Inflation Reduction Act.
According to Plug Power, a provision of the IRA “offers a production credit” of up to $3 per kilogram for clean hydrogen produced in the U.S. Plug Power plans to take advantage of this tax credit at the company’s hydrogen-production plant in Georgia.
And by the way, Plug Power also has a hydrogen plant in Tennessee as well as a plant in Louisiana that’s expected to be up and running by the end of this year. So, don’t be surprised if Plug Power maintains a rapid expansion pace, especially as the company benefits from government support.
Should You Buy Plug Power Stock? Definitely Maybe.
The market’s general sentiment toward Plug Power isn’t overwhelmingly positive, and a share-price recovery isn’t guaranteed. The only real “floor” here is zero, so only risk-tolerant people should consider investing in Plug Power.
On the other hand, the market already baked a lot of pessimism into the Plug Power share price. If there’s a recovery, it could be truly spectacular.
Hence, in light of the company’s potentially lucrative deals and government backing, I’m cautiously bullish about Plug Power stock. Just don’t overload your portfolio with Plug Power shares, as a crash continuation is still a possibility.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
