Truist analyst Tristan Richardson started coverage of Plug Power with a Buy rating and $60 price target
Shares of Plug Power (PLUG) are on the rise on Tuesday after the company and Renault (RNSDF) announced the signature of a Memorandum Of Understanding to launch a 50-50 joint-venture focused on vehicle systems based on hydrogen fuel cells. Commenting on the announcement, Roth Capital analyst Craig Irwin called the JV with Renault "transformational" and said he sees Plug entering the venture from a position of strength by contributing the key hydrogen technology.
HYDROGEN JOINT VENTURE: Groupe Renault and Plug Power announced the signature of a Memorandum Of Understanding to launch a 50-50 joint-venture based in France by the end of the first half of 2021. "The strategic JV will position Groupe Renault and Plug Power to become key players in Europe in the research and development, transformation, manufacturing and sale of fuel cell-powered vehicles and hydrogen turn-key solutions in the coming years," the companies said. This joint-venture platform will serve the fast-growing market of fuel cell light commercial vehicles, taxis, and commercial people transportation. Bringing complementary and competitive strengths together, and will build on Renault's experience in new energies and position in electric light commercial vehicles and on Plug Power's of experience in fuel cell technologies and hydrogen solutions.
The initial focus will be on the heavy van segment utilizing the Traffic and Master vehicle platforms. The joint-venture will combine the vehicle manufacturing capabilities of Groupe Renault with the fuel cell and hydrogen system manufacturing knowledge of Plug Power, establishing a vertically integrated fuel cell stack and system manufacturing center in France for integration into LCV vehicle platforms. In addition, this manufacturing center will provide hydrogen refueling systems, a key part of the hydrogen ecosystem. The partnership will create a hydrogen vehicle eco-system solution company that offers vehicles, hydrogen fueling stations, hydrogen fuel, and services to customers. The JV will start commercializing fuel cell LCV's in Europe starting in 2021 with pilot fleet deployments. Finalization of this joint venture is pending on the conditions normally applicable to this kind of operation, among which the presentation to employee representative bodies in accordance with applicable regulations and the potential clearance from the relevant competition authorities and should be completed by the end of the first half of 2021.
'TRANSFORMATIONAL' JV: Calling the joint venture with Renault "transformational," Roth Capital analyst Craig Irwin said he sees Plug Power entering the venture from a position of strength by contributing the key hydrogen technology. Financial commitments remain undefined at this point, but the analyst understands the partners will use an existing Renault Group facility for R&D and production to accelerate startup and contain near-term costs. Platform development also benefits from Renault's success in EV markets, where the company sold around 100,000 EVs in 2020, he added.
Irwin also acknowledged that the revenue potential here is greater than his first take, as the JV includes the whole vehicle plus the refueling infrastructure and fuel. The analyst maintained a Buy rating on Plug's shares but suspended his price target on the stock given a wide potential range for the longer-term financial trajectory.
BUY PLUG POWER: Meanwhile, Truist analyst Tristan Richardson initiated coverage of Plug Power with a Buy rating and $60 price target. In a research note to investors, Richardson pointed out that Plug Power enjoyed "exceptional" performance in 2020. While it's unlikely the shares repeat this move in 2021, he sees Plug Power converting "hydrogen hype" into concrete orders and profitability over the next three years, driving further outperformance.
The analyst also highlighted that Plug has outlined targets for 2024, including sales of about $1.2B and EBITDA of $225M. Despite COVID disruption near-term, he sees Plug tracking above these targets, particularly on the recently announced plans for entry into European EV and eventually into the broader Asian markets.
PRICE ACTION: In late morning trading, shares of Plug have jumped about 15% to $62.05.