In the western states of the U.S., in the Mediterranean basin and in the Australian state of South Wales, temperatures have hit record highs, creating major problems for people and extensive damage to the environment. These high temperatures have caused many fires that have destroyed vast areas that were previously covered with forests. It will take many years and require huge capital allocations before these natural resources will be reconstituted.
In central-northern Europe and many South-East Asian monsoon countries, torrential rains are so strong that entire villages were washed away and infrastructure collapsed.
Experts believe these extreme weather events will intensify as a result of global warming. Once greenhouse gases are released into the atmosphere as a result of urban and industrial activities, they impede heat loss from the planet's surface. Governments around the world are investing billions of dollars to replace these polluting activities with cleaner ones.
Vehicles, container ships and other forms of transportation are some of the most polluting activities, and are thus one of the key areas of development for replacing fossil fuels with zero-emission energy sources. Since this transition will not happen overnight but through the years, the sector is looking at clean energy sources that can gradually take the place of fossil fuels. One of these sources is hydrogen.
Through the automotive sector especially, hydrogen will play an important role in the global strategy to combat the effects of climate change. Thus, investors should pay attention to those companies that are developing hydrogen-based technologies, as the demand for their innovations should follow the expected increase in the employment of this gas as a clean source of energy.
Plug Power Inc (PLUG, Financial) is a good investment opportunity in this industry, in my opinion. The New York-based company develops hydrogen fuel cell systems that replace conventional batteries in powering electric vehicles. The company is a global leader in the e-mobility market as its activities have supplied more than 35,000 fuel cell systems, beating any other operator in the world. These devices enable the production of electricity from hydrogen and an oxidizing agent thanks to a chemical reaction.
What makes Plug Power Inc technology unique in the hydrogen fuel cell market so far, is the possibility to recharge an electric motor in just a few minutes. This avoids the power drop that happens at the end of the recharging. This advantage is possible thanks to an accumulator of hydrogen which is incorporated in the device. Thus, Plug Power technologies not only guarantees better performance compared to conventional lead batteries, but also compared to competitors whose products can generate electricity as long as there is enough hydrogen and an oxidizing agent to assure the chemical reaction. These factors are expected to improve the company's profit margins, a key driver for the share price, though its margins were still negative as of the second quarter of 2021.
In its most recent quarter, Plug Power reported an 83% year-over-year increase in revenue to nearly $125 million thanks to a strong increase in the shipment of hydrogen fuel cell systems. The company also reported a 75% jump in gross billings to more than $126 million and now it targets $750 million for the next year.
It also expects that its profitability margins will shift into positive territory in 2022 and continue to improve over the next years. Following this, the share price (which is $27.70 as of the writing writing of this article) should rebound significantly.
After a year-to-date drop of 14%, the stock looks cheap compared to the 52-week range of $10.11 to $75.49. It also trades below the 50-Day Moving Average of $29.15 and the 200-Day Moving Average of $36.61.
Disclosure: I have no positions in any security mentioned.
