On Monday, Oppenheimer maintained its Perform rating on Plug Power (NASDAQ:PLUG) shares following the company's announcement of a significant framework agreement with Allied Green Ammonia. The deal, involving 3GW of electrolyzers, is seen as a substantial step forward for the green hydrogen industry and a strong validation of Plug Power's position as a leader in the space.
The agreement, which is nearing a final investment decision, has already secured land and electricity. Additionally, the production output of the facility is pre-contracted with Trammo, a company specializing in the trading and logistics of physical commodities, including ammonia and fertilizers. The transaction is expected to generate revenue between $1.0 billion and $1.5 billion for Plug Power, with the majority of this revenue anticipated to be recognized in the years 2026 and 2027.
The scale of this project underscores the growing momentum in the green hydrogen sector and Plug Power's significant role within it. The analyst from Oppenheimer highlighted that the deal could lead to a rise in Plug Power's share value as investors gain a clearer understanding of the project's magnitude and its likelihood of progressing.
The collaboration with Allied Green Ammonia marks a milestone for Plug Power in terms of revenue potential and industry impact. As the project advances towards its final stages, it is expected to contribute positively to Plug Power's financial performance in the latter half of the decade.
InvestingPro Insights
While Plug Power's recent agreement with Allied Green Ammonia signals potential future growth, current financial metrics from InvestingPro paint a challenging picture. The company's market cap stands at $1.83 billion, reflecting recent stock price declines. InvestingPro data shows that Plug Power's revenue for the last twelve months as of Q2 2024 was $684.49 million, with a concerning revenue growth decline of 22.2% over the same period.
InvestingPro Tips highlight some key concerns for investors. The company is "quickly burning through cash" and "suffers from weak gross profit margins," which aligns with the reported gross profit margin of -79.8% for the last twelve months. These factors may impact Plug Power's ability to fully capitalize on the potential $1.0-$1.5 billion revenue from the Allied Green Ammonia deal.
Despite these challenges, one InvestingPro Tip notes that "liquid assets exceed short term obligations," suggesting some financial stability in the near term. This could be crucial as the company works towards realizing revenue from the new agreement in 2026 and 2027.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Plug Power, providing deeper insights into the company's financial health and market position.
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