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Plug Power sees the Cut Inflation Act create a ‘boom’ in its green hydrogen business, and stock soars

Shares of Plug Power Inc. turned around to trade sharply higher on Wednesday as investors and analysts appeared to embrace the hydrogen and fuel cell company’s praise for the Energy Reduction Act. inflation (IRA), given the company’s disappointing second quarter results.

The IRA, which passed the Senate over the weekend and is now heading to the House of Representatives, provides billions of dollars for clean, renewable energy generation, and would enact a production tax credit ( PTC) which encourages the production of clean hydrogen. Learn more about the IRA.

Plug chief executive Andrew Marsh said on a post-earnings conference call with analysts that the IRA provides a “trifecta effect” because it’s good for the climate, for jobs and for national security. . And that’s great for the business.

“With the passage of the law, we expect a boom in our electrolysers and green hydrogen business,” Marsh said, according to a FactSet transcript. “All applications using gray hydrogen [produced from fossil fuels] today, such as the manufacture of fertilizers, will now be able to buy green hydrogen at a price competitive with the grey.

The original CAP,
charged 15.3% more in afternoon trading. It was down as much as 4.0% in after-hours trading Tuesday shortly after Plug released its second-quarter results, and as low as 4.3% in Wednesday’s premarket, before to turn the tide.

FactSet, MarketWatch

The company reported after Tuesday’s close a net loss in the second quarter that widened to $173.3 million, or 30 cents per share, from a loss of $99.6 million, or 18 cents per share. , at the same time a year ago. That missed the FactSet consensus for a per-share loss of 21 cents.

Revenue rose 21.4% to $151.3 million, but was below the FactSet consensus of $159.0 million.

Revenue cost increased less than revenue, up 11.5% to $183.7 million, as gross margin improved to 21.5% from 32.4%.

The company reiterated its 2022 goal of $900-925 million in revenue.

In a letter to shareholders, the company said the IRA was a “tremendous catalyst” for all forms of clean energy development and “a game changer” for Plug as the PTC is expected to further strengthen its leadership in the industry. green hydrogen ecosystem.

“We believe the PTC will aid in capital formation, capital recycling and leverage,” the letter states.

“We believe this momentum provides access to a greater pool of capital to help accelerate the growth of the green hydrogen industry while reducing the levelized cost of green hydrogen,” the letter adds.

JP Morgan analyst William Peterson reiterated his overweight rating on Plug, but raised his share price target to $32 from $28. While the results confirmed the margin headwinds he was expecting, they also showed improvement, which could accelerate the time to profitability.

“[R]Recent policy updates, including the proposed hydrogen generation tax credits and fuel cell investment tax credits in the Cut Inflation Act, could bring the company to an inflection in profitability approximately 6 months earlier than expected, provide $500 million of additional annual cash flow and reduce the return on investment of the hydrogen plant for periods of 4 to 5 years (~ the half the time than without incentives),” Peterson wrote in a note to clients.

Read also: Fuel cell, electric vehicle and solar stocks rally as climate bill makes ‘alternative’ energy ‘more profitable’

Oppenheimer’s Colin Rusch also maintained his outperform rating and share price target at $63, implying a more than double from current levels.

“We believe that Plug is uniquely positioned to benefit from the [IRA] legislation with its leadership position in green hydrogen,” Rusch wrote. “We expect the company to aggressively pursue new contracts with numerous customers and develop a comprehensive green hydrogen network in the United States, serving industrial applications first, followed by an increase in material handling. materials, stationary energy and road transport.”

Plug’s stock has climbed 81.1% in the past three months, while the S&P 500 SPX index,
gained 4.9%.

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