What happened
Shares of fuel cell company Plug Power (NASDAQ: PLUG) rocketed 6.5% through noon ET on Friday -- and for the most surprising of reasons: a lukewarm "equal weight" rating on Wall Street.
This morning, investment bank Wells Fargo announced it is raising its price target on Plug stock, which was already up 12% since the company reported earnings earlier in the week.
So what
Plug's earnings per se weren't particularly impressive, with sales rising a respectable 21% -- but losses up 74% as operating costs doubled. In its note, covered by The Fly today, Wells Fargo charitably described the company's numbers as "light" of analyst targets. Nevertheless, Wells added $10 to its price target for Plug stock -- now targeting $29 a share -- on the theory that faster growth at the company makes it $3 more valuable and tax incentives contained in the Inflation Reduction Act of 2022 could add a further $7 per share in value.
Suffice it to say that Plug agrees with this assessment. In its earnings report Tuesday, Plug said it is counting on a $3-per-kilogram Clean Hydrogen Production Tax Credit (PTC) for the green hydrogen the company is trying to produce to use as a fuel source. Management predicted this credit will translate into $500 million per year in additional cash flow for the company if it achieves production rates of 500 tons per day by the end of 2025.
And according to Wells, Plug is now telling investors that it expects to be profitable as early as 2024 -- instead of 2025 as previously projected.
Now what
That's huge good news, if true. (In its 8-K filing with the Securities and Exchange Commission, Plug stopped short of promising profitability in 2024 specifically, saying only that "PTC will accelerate timeline to profitability and positive cash flows.")
But for investors in Plug stock, it also holds a risk: As long as Plug continues to simply promise it will become profitable eventually -- as it's been promising since its foundation a quarter century ago -- investors are able to keep hope alive that this profit will actually arrive ... eventually. The nearer Plug moves the goalposts, however, the sooner investors may face the potential to be disappointed when profits do not arrive on schedule.
Granted, there's always the possibility that Plug will in fact turn profitable in 2024. But after watching the company attempt this for 25 years now, and fail, I have my doubts.
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