$1.5 Billion Deal Should Put Concerns Over Plug Power Stock to Rest
During the first full week of 2021, Plug Power (NASDAQ:PLUG) came onto the radar of traders worldwide. That’s because PLUG stock made some big and sudden moves to the upside.
It’s not the first time that there’s been heated discussion over PLUG stock. You can look on some popular financial message boards and find the bulls and bears debating PLUG on pretty much any given day.
Yet, both the trading volume and the intensity of the discussions surrounding PLUG stock have ramped up in recent days. So, what’s causing all of the commotion?
Just as importantly, should prospective investors consider taking a long position in PLUG stock now? We’ll begin our analysis today by tracking PLUG’s jaw-dropping price action.
PLUG Stock at a Glance
On the afternoon of Jan. 8, PLUG stock was up by around 11% and trading near the $51.50 level. That might sound like a huge move, and it’s pretty big, but we saw something even bigger not too long ago.
The day prior, on Jan. 7, the bulls came out in full force and pushed the PLUG share price up by an eye-popping 30%. By the end of the trading session, the stock price settled at $47.29.
Let’s turn back the clock so that we can put all of this into perspective. Just a year ago, PLUG stock was near the $4 level. Moreover, at one point in time during the past year, PLUG shares fell to $2.53.
Now that PLUG has a market capitalization of around $21 billion, it’s fair to say that the company is a major player in the new, green-energy-fueled economy. So, what could possibly have propelled PLUG stock to its current price?
Accelerating the Hydrogen Market
It was a real head-turner when the news came out. Reportedly, Plug Power disclosed a massive $1.5 billion investment from a South Korean company known as SK Group.
On top of that, Plug Power intends to form a joint venture with SK Group by next year. The stated objective of the deal is “to accelerate hydrogen as an alternative energy source in Asian markets.”
What will SK Group get out of this deal? It’s been reported that SK Group will receive 51.4 million shares of Plug Power at a price of $29.29 each.
Given the much higher price tag of PLUG stock today, $29.29 is a terrific bargain, to say the least. In any case, the goal of the collaboration/investment is to provide hydrogen fuel-cell systems as well as hydrogen fueling stations and electrolyzers to the Korean and other Asian markets.
A Timely Opportunity
The deal with SK Group is expected to close in the first quarter, and the two companies plan to form a joint venture by 2022. The market has already signaled its resounding approval.
Plug Power succinctly explained the positive implications of the arrangement. “The opportunity to partner with SK presents an attractive and timely opportunity to establish a foothold in (the Korean) market with one of South Korea’s leading industrial conglomerates,” the company said in a statement.
The bears will be hard-pressed to come up with an argument against this. As Asia shifts away from fossil fuels and from pollutants generally, Plug Power’s hydrogen fuel-cell solutions offer renewable energy solutions without emitting greenhouse gases.
In light of all this, don’t be surprised to see analysts scrambling to hike their price targets.
For instance, H.C. Wainwright recently reiterated the firm’s “buy” rating on PLUG stock while lifting its price target from $35 to $60.
SK Group’s investment in Plug Power represents more than just an influx of capital. It also signals a belief in the growth of the international hydrogen market.
That’s a reasonable belief. It’s also reasonable for investors, current and prospective, to take a bullish stance on PLUG stock.
On the date of publication, Louis Navellier had a long position in PLUG. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.