For the second time in a week, hydrogen fuel cell company Plug Power (PLUG) had big news to...

For the second time in a week, hydrogen fuel cell company Plug Power (PLUG) had big news to…

For the second time in a week, hydrogen fuel cell company Plug Power (PLUG) had big news to report. Last week, as you may recall, it was a $1.5 billion alliance with Korea’s SK Group to build a “hydrogen economy” for South Korea. This week, it’s a deal to build fuel cell vans in France alongside local partner Renault — and although Plug didn’t attach a price tag to this one, investors still cheered like mad, sending Plug stock up more than 22% in a day.

As Plug revealed Tuesday, it has signed a memorandum of understanding with the French automaker. Through it, the parties expressed interest in forming a 50-50 joint venture within the next six months to supply “turn-key fuel cell vehicle solutions with hydrogen fuel, refueling infrastructures and services” to customers in France — and capture 30% of the market for fuel cell-powered light commercial vehicles in the country. Renault will provide the automobile manufacturing capability, and Plug will supply the fuel cell systems to make them go “zoom!” Plug will also manufacture hydrogen refueling systems to fuel up the vans on the road.

Shareholders weren’t the only ones pleased by Plug Power’s announcement, and analyst Christopher Souther at B. Riley quickly rushed out a note doubling down on its “buy” rating on Plug stock, and raising his price target more than 50%, to $79 a share.

Calling Renault a “strong partner” for Plug on the Continent, where the local market for fuel cell-powered light commercial vehicles is expected to grow from essentially zero today, to 500,000 units by 2030. Souther increased his long-range forecast for Plug’s commercial vehicles revenues accordingly. In fact, long before 2030, he is valuing Plug stock at 20 times his fiscal 2024 sales forecast.

What is that forecast, precisely? Souther didn’t say straight out. But a $79 share price would imply an enterprise value of a little over $37 billion for Plug stock, implying that the analyst sees the new relationship with Renault pushing Plug’s 2024 revenues up past $1.8 billion — roughly a six-fold increase over Plug’s trailing revenues of $308 million. Curiously, this estimate is nearly twice the $1 billion in fiscal 2024 revenue that Plug itself most recently promised.

And here’s another curious thing about Souther’s predictions: While not expressly putting a number to his 2024 forecast, Souther did give detailed guesses at what Plug will produce nearer term, predicting full-year 2020 sales and full-year 2021 sales as well. In contrast to the average consensus on Wall Street, where most analysts agree Plug did perhaps $329 million in sales last year, Souther thinks the company’s revenues were only $291 million. Similarly, consensus estimates for fiscal 2021 put Plug’s sales at $444 million — but Souther sees only $419 million.

Now, how the analyst goes from predicting disappointing results for two straight years, to predicting sales twice what Plug itself promises just three years from now is not quite clear. And why he is recommending that investors buy Plug ahead of what, by his own admission, look likely to be sales disappointments is similarly opaque.

Then again, as Souther himself laments: No matter how expensive Plug stock gets, “it is tough to fight the secular tailwinds.”

So, that’s B. Riley’s view, what does the Street of the Street have in mind? The current outlook offers a conundrum. On the one hand, based on 10 Buys and 1 Hold, the stock has a Strong Buy consensus rating. However, after soaring so high recently, the analysts expect shares to cool down and anticipate downside of 18% from current levels.

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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