If you’re interested in investing in the clean energy revolution that’s ongoing right now, there are many options.
There are stocks like utilities that generate clean energy from the sun or wind, manufacturers of solar panels or wind turbines, or those that are experimenting with new climate-friendly technologies.
It’s the last of these – which are pushing the boundaries of innovation – where a lot of the future potential explosive growth lies.
However, it’s also the bucket of clean energy stocks that carries the most risk given the uncertainty of success.
Yet in all portfolios, there’s potential to take some risk in individual companies as long as we size the positions appropriately.
So, for clean energy fans, one company that’s making serious progress in an exciting area is Plug Power Inc (NASDAQ: PLUG).
Here’s why it could be a good addition to any long-term portfolio looking for exposure to the clean energy transition.
Looking to green hydrogen to cut carbon emissions
Plug Power is a company focused on developing hydrogen fuel cell systems that can eventually replace batteries used in electric vehicles (EVs) and industrial equipment.
Hydrogen is actually a form of clean energy, with the only waste it generates being water.
As a result, there has been a lot of research and development looking at how to scale hydrogen as an alternative fuel source for the future.
Plug Power is the leader in developing and manufacturing hydrogen fuel cell systems.
For example, in 2022 Plug Power inked an agreement with retail giant Walmart Inc (NYSE: WMT) to provide up to 20 tonnes of liquid green hydrogen to power Walmart’s near-10,000 fleet of lift trucks at its various distribution and fulfillment centres.
Plug Power has multiple business lines, including electrolyzers, stationery fuel cells, fuel cells for transport and hydrogen-producing plants. That makes it uniquely positioned to take advantage of a massive total addressable market (see below).
Source: Plug Power IR presentation, May 2023
Making progress but still loss making
Of course, any company (no matter how exciting the story) is only as good as its financials.
On this front, there is impressive growth from Plug Power. In its most recent Q1 2023, the company chalked up revenue of US$210.3 million, which was up 49% year-on-year.
For the whole of 2023, it’s guiding for US$1.4 billion in revenue, which would be up nearly 100% from its 2022 full-year revenue of US$701 million. Furthermore, it’s looking to achieve a positive gross margin of 10%.
However, investors should note that (right now) the company is currently loss making. In Q1 2023, Plug Power had a gross margin of negative 33%. This was a sequential improvement from the negative 36% recorded in Q4 2022 though.
Business opportunities and ambitious targets
Plug Power has built up a series of hydrogen plants in the US, including in Georgia, Louisiana, New York and Texas.
It has planned commission of over 200 tonnes per day (TPD) of hydrogen by the end of 2023 and over 500 TPD by the end of 2025.
More recently, Plug Power has also announced several new deals for its containerised hydrogen electrolyzers.
It plans to fill three new orders from three separate companies in the aluminium, steel, and glass manufacturing industries in Europe.
It’s a prime example of the potential uses of green hydrogen in industrial manufacturing processes, many of which actually emit lots of carbon.
Separately, Plug Power has set ambitious future revenue and gross margin targets. In 2026, it has a full-year revenue target of US$5 billion and for 2030 it has a full-year revenue target of US$20 billion.
In terms of gross margin targets, for 2026 and 2030 these have been set at 30% and 35%, respectively.
Unique opportunity to tap into the hydrogen economy
Plug Power is building an ecosystem that looks to leverage the many benefits of hydrogen. Investors should remember that this is currently a more speculative play on the clean energy transition.
As investors can see from its price chart, Plug Power shares are up over 340% in the past five years BUT down over 85% from its early 2021 high of around US$67. That illustrates its many ups and downs.
But by taking a small position and understanding the volatile (yet potentially explosive) nature of Plug Power stock, investors can get exposure to an exciting part of the clean energy transition.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
