The roaring cat return to social media platform Reddit inspired a surge of meme stock price on Monday, and it seems that Plug in the power (NASDAQ: CAP) stocks are the main beneficiaries of the recovery. The still-unprofitable hydrogen fuel cell company’s stock price rose by double-digit percentages Monday, closing in on consensus targets of around $3 per share.
However, one analyst thinks Plug Power could go even higher.
Ahead of Monday’s rally, TD Cowen’s Jeffrey Osborne cut his price target for Plug stock to $5 per share — a downgrade of sorts, but still implying that Plug Power could skyrocket 34% over the next year. next year.
Is Plug Power stock a buy?
Plug Power reported a loss of $0.46 per share last week on a 43% year-over-year revenue decline, results a lot worse than Wall Street predicted. Operating costs have also fallen, but not as fast as revenues – only 29%. As a result, Plug’s net losses increased 43% year over year.
Miserable news everywhere. But if that’s the case, why is Osborne saying Plug Power stock will rise?
Last month, Plug announced that its new hydrogen production plants in Georgia and Tennessee were operating at full production capacity, and its Louisiana plant is “on track” to meet that goal in the third quarter. Plug therefore now produces around 25 tonnes per day (TPD) of liquid hydrogen and is on track to reach 40 TPD over the next five months. Osborne cites this 40 TPD figure as key to his buying thesis, predicting that new revenue from selling hydrogen fuel at higher prices, combined with lower costs, will generate better profit margins for Plug this year.
Maybe it is. (It’s hard to imagine Plug’s margins increasing worse). But even so, I have to say that this buy thesis doesn’t make a lot of sense. Plug will increase production and prices will increase? That’s not generally how economics works, nor does it sound like a business plan that would increase the popularity of switching to hydrogen.
To me, that makes Plug Power stock a long-term sell.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the securities mentioned. The Mad Motley has a disclosure policy.
Is Plug Power Stock Going to $5? 1 Wall Street analyst thinks so. was originally published by The Motley Fool
