Penny stock Plug Power (PLUG) soared 25% on Wednesday after it disclosed a multi-year extension of its liquid hydrogen supply deal with a major U.S. industrial gas company through 2030. The news helped boost investor sentiment about the hydrogen fuel cell company’s ability to improve margins and long-term growth prospects.
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The deal is expected to ensure a stable and reliable hydrogen supply for Plug’s expanding applications business that too at lower costs. Overall, the deal supports Plug’s growing base of over 275 customer sites and aligns with its cost-cutting initiative, Project Quantum Leap.
CEO Andy Marsh called the agreement “a win for Plug, our customers, our suppliers, and our margin profile.”
Interestingly, Plug disclosed plans to launch over 40 new hydrogen sites in 2025. Further, it will expand production capacity at plants in Georgia, Tennessee, and Louisiana, which currently produce 40 tons/day of liquid hydrogen.
Legislation Sparks Optimism
This extension comes on the heels of recent U.S. energy and tax legislation aimed at growing the clean hydrogen industry. PLUG expects the new policies to boost market growth going forward.
Importantly, JPMorgan analyst Bill Peterson sees the new bill as a good sign for Plug Power’s future, especially in boosting demand for clean hydrogen. However, the analyst noted the real impact will depend on whether Plug can improve profit margins and slow down its spending in the near term.
Is PLUG a Good Stock to Buy?
Turning to Wall Street, PLUG stock has a Hold consensus rating based on four Buys, 11 Holds, and four Sells assigned in the last three months. At $1.34, the average Plug Power stock price target implies a 24.72% downside potential.
