We recently compiled a list of the 10 Best Green Energy Penny Stocks to Buy Now. In this article, we are going to take a look at where Plug Power (NASDAQ:PLUG) stands against the other green energy penny stocks.
Exploring Green Energy
Green energy comes from naturally replenished resources such as the sun, wind, and tides, and is used for various purposes including electricity generation, heating, and transportation. Unlike traditional forms of energy from finite sources such as fossil fuels, green energy is sustainable and includes several types of energy such as bioenergy, geothermal energy, hydrogen, hydropower, marine energy, solar energy, and wind energy.
According to the International Energy Agency (IEA), there has been impressive growth in green energy spending, however, it remains highly concentrated in a few regions, primarily advanced economies, and China. Green energy investments are not evenly distributed due to obstacles such as high upfront costs and macroeconomic challenges affecting broader adoption. While costs for clean technologies have risen in recent years, they remain competitive compared to fossil fuels.
Despite record global investments in energy transition technologies reaching $1.3 trillion in 2022, this amount falls short of the necessary investment to achieve the 11.2 Terawatts of green energy capacity pledged by countries. To address this, there is a need for increased and more investment in green energy, particularly in developing countries, which have received disproportionately low levels of funding despite their high energy needs. The global investment in renewable generation capacity must exceed USD 1.5 trillion annually to meet targets.
Inflation Reduction Act Spurs Investments in Green Energy
Analysts are bullish on the investment opportunities in green energy, particularly in light of the U.S. government’s recent fiscal stimulus efforts, including the Inflation Reduction Act. The Biden administration’s $370 billion investment in energy and climate incentives is expected to significantly boost various sectors within the green energy industry. Experts highlight the importance of tax credits and other incentives aimed at developing renewable energy infrastructure and supply chains, especially in the U.S. and with fair trade partners. While traditional, large-cap-weighted ETFs are popular, there’s growing interest in more diversified, equal-weighted approaches that include smaller, innovative companies in areas like battery production, solar power, and critical mineral extraction. This transition to renewable energy is seen as a global trend, offering investment opportunities beyond North America.
JP Morgan is actively investing in green energy projects by providing tax equity financing to support the development and construction of solar and storage projects in the United States. In May, the bank committed $680 million in tax equity financing to Ørsted, a leading energy developer, for the construction of two major projects: the Eleven Mile Solar Center, a 300 MW solar project in Arizona, and the Sparta Solar, a 250 MW solar project in, Texas.
This investment is one of the largest solar and storage tax equity transactions since the passage of the Inflation Reduction Act (IRA), which introduced new tax credit mechanisms, including the ability to transfer tax credits. The bank’s involvement allows it to optimize its federal tax obligations while supporting the expansion of green energy infrastructure. Additionally, this deal builds on its existing investments in 1.8 GW of Ørsted’s U.S. onshore green energy portfolio, demonstrating the bank’s interest in the energy transition.
The current level of investment in green energy falls short of what is required to transition to a sustainable energy future. A more equitable distribution of investment and a stronger commitment to overcoming barriers such as high upfront costs. With that in context let’s take a look at the 10 best green energy penny stocks to buy now.
Our Methodology
For this article, we scanned green energy ETFs plus online rankings to compile an initial list of 50 green energy stocks. From that list, we narrowed our choices to 10 stocks trading under $5 that were the most popular among hedge funds. The hedge fund sentiment was taken from our database of 912 elite hedge funds as of Q2 of 2024. We also included the market cap of these companies as of September 4. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A generator being fueled and readied for use as part of an end-to-end green hydrogen ecosystem.
Plug Power (NASDAQ:PLUG)
Number of Hedge Fund Holders: 15
Market Capitalization as of September 4: $1.56 Billion
Plug Power (NASDAQ:PLUG) specializes in green hydrogen production and fuel cell solutions. The company has an integrated product portfolio that includes electrolyzers, hydrogen fuel cells, and hydrogen infrastructure solutions. Plug Power (NASDAQ:PLUG) has signed agreements with major players such as Nikola Corporation and has already deployed 72 hydrogen-powered trucks.
Plug Power (NASDAQ:PLUG) is expanding its green hydrogen production capabilities and is constructing a new hydrogen plant in Louisiana which is expected to be completed by the end of 2024. The company also plans to construct two additional plants in Texas and New York, and aims to become one of the largest green hydrogen producers in the United States. The company’s new facilities are supported by a $1.6 billion loan from the U.S. Department of Energy, which enhances the company’s ability to scale production and improve margins.
Plug Power (NASDAQ:PLUG) was recognized for the new green hydrogen production tax credit of $2.60 per kilogram for green hydrogen. As of Q2, the company produces green hydrogen at a cost of $4 to $5 per kilogram and sells it for $6 to $7 per kilogram. The new tax credit would lower the company’s cost by up to $3 per kilogram.
In addition to hydrogen fuel production, Plug Power (NASDAQ:PLUG) has seen substantial growth in its electrolyzer business. In Q2, the company generated $15 million in revenue from electrolyzers, a significant increase from $7 million in the same period the previous year. Management estimates $320 million in revenue from electrolyzer sales over the next two years.
Plug Power’s (NASDAQ:PLUG) cryogenic equipment is critical for hydrogen storage and transportation. Plug Power (NASDAQ:PLUG) expects to generate $72 million in revenue from cryogenic equipment and other related technologies in the next year.
Plug Power’s (NASDAQ:PLUG) expansion into green hydrogen production, supported by growing demand, favorable government policies, and strong growth in its electrolyzer business, positions the company for long-term success. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $4.25, which represents an 85% upside potential from its current level. As of the second quarter, the stock is held by 15 hedge funds and the stakes amount to $10.78 million.
Overall PLUG ranks 3rd on our list of the best green energy penny stocks to buy. While we acknowledge the potential of PLUG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLUG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.