On Jul 15, 2014, the share price of
Plug Power Inc.
) closed at $4.85, reflecting a jump of 16.03% from the previous
day's closing. The publication of an initiation report on Plug
Power with Outperform rating by Arlington, VA-based firm
FBR & Co.
), previously known as FBR Capital Markets Corporation, boosted its
share price. FBR & Co. projected a 12-month price target of $8
Factors for Outperformance Rating
FBR & Co. has pointed out several growth indicators including
transformation of business model, diversified customer base,
winning of new orders in the U.S., expansion plan in the European
market and the roll-out of a hydrogen delivery solution, which
could act as catalysts for Plug Power's future growth.
FBR & Co. believes that Plug Power has successfully transformed
its operations from the introduction of fuel cell power packs in
material handling systems to offering hydrogen-based solutions for
a broad array of material handling applications.
Plug Power has showcased its comprehensive GenKey hydrogen fuel
cell solution during the MODEX 2014 tradeshow in Atlanta and the
2014 Warehousing Education and Research Council tradeshow and
conference in Chicago.
GenKey solution consists of three separate elements: GenDrive fuel
cell units, GenFuel hydrogen fuel and infrastructure, and GenCare
maintenance service. Plug Power offers full integration and
utilization of the whole GenKey package for customers to ensure
flawless conversion to hydrogen fuel cell-based power for their
material handling functions. Introduction of GenKey solution makes
the material handling process easier.
For the Genkey solution, Plug Power has already received order from
Wal-Mart Stores Inc.
). Another retail firm,
The Kroger Co.
), will also deploy the GenKey solutions at its two sites.
In Mar 2014, Plug Power received a multi-site GenKey purchase
contract from Wal-Mart Stores. Per the agreement, Plug Power will
supply 1,738 GenDrive fuel cell units, which will be deployed at
Wal-Mart's six North America distribution centers over the next two
years. Plug Power will provide service to these units for six
Introduction of the new solution and strong existing product line
are expected to help Plug Power win more contracts from the
existing customers or add new ones. The company's customers range
from food distribution companies to industrial manufacturing firms.
It is evident from past records that Plug Power often receives
orders from domestic and foreign customers. In May 2014, Plug Power
obtained an order from Central Grocers to provide 182
next-generation GenDrive fuel cell units to operate its electric
lift truck fleet in Joliet, IL. In addition, Plug Power entered
into a 5-year GenCare service agreement with Central Grocers for
the latter's GenDrive fleet.
In addition to solidifying presence in the U.S., Plug Power is also
expanding its European operations as the European market is roughly
100% larger than the U.S. market. Plug Power has taken several
initiatives, including joint venture with Air Liquide, to tap the
prospective European market and meet higher demand for the electric
We have identified few positives, including an increase in sales
force and reduction in operating costs through acquisition of
ReliOn Inc., which can act as growth drivers for Plug Power.
Plug Power's strategic initiative includes deployment of higher
number of sales force to deal with the increasing demand for
products and services. This initiative will enable the company to
frequently attend customers and respond quickly to their
requirements. Steady follow up and meeting with clients will help
Plug Power to renew the existing contracts and win new ones.
On the other side, Plug Power is currently following inorganic
route to expand its operations. On Apr 2, 2014, Plug Power has
acquired the assets of ReliOn Inc. Spokane, WA-ReliOn Inc., a
developer of hydrogen fuel cell stack technology and fuel cell
In addition, the company partnered with French company Axane,
S.A. under the name HyPulsion, S.A.S., to develop and sell hydrogen
fuel cell systems for the European market. In Apr 2014, the company
has signed a memorandum of understanding with South Korean company
Hyundai Hysco to form a joint venture to manufacture and sell
hydrogen fuel cells in Asia. These initiatives will enable Plug
Power to manufacture products at a lower price and reduce
dependence on third party suppliers.
In a Nutshell
We expect Plug Power's successful transformation of business model,
a strong order book from U.S. clients, growth in sale force counts,
increasing focus on the European operations and disciplined
investment in inorganic growth strategies to boost its future
Plug Power currently has a Zacks Rank #3 (Hold).
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