August 17, 2022, Plug Power Inc. (NASDAQ:PLUG) and MP Materials Corp. (NYSE:MP)
Now that the Inflation Reduction Act is law, these surging green plays have even more room to run as the best stocks to buy now.
As the Dow closed 240 points higher (0.71%) on Tuesday (August 16, 2022) and booked a fifth straight positive day, green energy and EV-related stocks led the way following the official passing of the Inflation Reduction Act. High-risk, high-reward names like Plug Power Inc. (NASDAQ:PLUG) and MP Materials Corp. (NYSE:MP) are scorching from this news and looking like the best stocks to buy now.
This $700 billion bill aims to lower energy and healthcare costs while trimming the deficit. The bill allocates roughly half its budget ($369 billion) for U.S. energy independence, fighting climate change with clean energy investments, and extending tax credits for EVs. The bill’s goal is to reduce greenhouse gas emissions by 40% by 2030 and puts a premium on America’s energy independence, including bolstering U.S. rare earth supply instead of relying on China.
PLUG and MP are the best stocks to buy now and tailor-made for this bill.
PLUG isn’t a name for investors focused on fundamentals. Still, it is a prominent hydrogen energy player in a high-growth industry with a robust client list. It will, without a doubt, benefit from the bill’s clean energy incentives.
MP, the largest rare earth mineral provider in the Western Hemisphere, provides critical materials for EVs and other devices that would otherwise come from China. Fundamentally, MP is also rock solid and has enormous potential to continue its growth trajectory. The bill would also not have passed unless West Virginia moderate Senator Joe Manchin signed off on incentives to bolster American rare earth independence.
Both of these stocks remain highly speculative. However, the catalysts are mounting. Even though PLUG and MP have scorched lately, analysts still see a 30-50% upside. That’s a recipe for being the best stocks to buy now.
Plug Power Inc. (NASDAQ:PLUG)
The hydrogen fuel pioneer has surged 80+% in the last month and could still have over 37% to go.
Plug Power is a prominent provider of end-to-end clean hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, and the stationary power market. PLUG is pioneering a green hydrogen ecosystem through energy production, zero-emission fuel cell products, and storage and delivery.
Moreover, it has a global footprint and already counts NASA, Amazon, Boeing, FedEx, Walmart, and Home Depot as clients for its materials handling (forklift) products. It also has strategic agreements with Airbus, Lhyfe, Edison Motors, Phillips 66, Apex Clean Energy, BAE Systems, and Universal Hydrogen Co.
With the inflation reduction act now signed into law, Plug Power CEO Andy Marsh says that the dynamics have completely changed for its electrolyzer and green hydrogen operations.
After all, the stock has more than doubled since May, risen over 80% in the last month, and still has significant analyst upside. The Company, while still speculative, sits far and away one of the best stocks to buy now.
Despite Missing Earnings Estimates, PLUG Upgraded its Guidance Because of the Inflation Reduction Act
Plug Power posted its quarterly earnings results on August 9, 2022, and missed earnings and revenue estimates by $0.10 and $11 million, respectively. Perhaps that’s a bit concerning on the surface. But look deeper.
Revenue grew 21.5% year-over-year, and the Company bumped its full-year guidance. PLUG now sees full-year revenues between $900 million-$925 million compared to $915.27 million analyst estimates.
However, the Company isn’t only looking at full-year 2022 for its growth potential. It sees the Inflation Reduction Act bolstering the Company’s prospects through 2025. Its electrolyzer business has a backlog of 1.5GW compared to its 1GW target, while its material handling business segment also sees significant demand.
We did, after all, already mention its A-list clientele.
Perhaps that’s why Finbox projects its revenue to grow at a 43.4% 5-year CAGR.
A Stock Not to Buy for Value, But to Buy for Limitless Growth Projections
First and foremost, you can throw PLUG’s fundamentals out the window when considering why it’s the best stock to buy now. It’s a speculative play on a booming industry that you buy for the blue sky growth potential.
Although PLUG is the type of stock that when it’s bad, it’s really bad, when it’s good, it’s really good, right now, it’s in that “really good” phase. You can see it from its stock chart. It’s more than doubled since its May lows, and risen over 80% in the last month.
Forget the fact that PLUG’s revenue could see a 43.4% 5-year CAGR, coupled with the Company’s recent guidance.
The Company’s skyrocketing because investors are looking forward based on the impact that the Inflation Reduction Act could have on Plug Power’s prospects. PLUG erased seven weeks of losses in three weeks because investors are looking ahead.
Plug Power projects to see over 80 tons of hydrogen use in 2024 and is committed to achieving 50% green content. This year alone, its electrolyzer business in Europe exceeded expectations by 50%. At the same time, its 120MW deal with New Fortress Energy can expand to 500MW, bringing that same momentum to U.S. soil.
Needless to say, it’s running laps around competitors like Fuel Cell and Ballard Power.
Hydrogen could be the missing link to a sustainable future, and PLUG is at the forefront as one of the best stocks to buy now.
Along With a Raised Outlook Come Improved Technicals
On the technical side, Barchart sees many short-term, medium-term, and long-term BUY signals for PLUG, such as its
- 20 Day Moving Average
- 20 – 50 Day MACD Oscillator
- 20 – 100 Day MACD Oscillator
- 50 Day Moving Average
- 100 Day Moving Average
- 150 Day Moving Average
- 200 Day Moving Average
It also could have more upside in its future, with it currently trading around its first support level of $29.20 and yet to touch any of its resistance points at $30.92, $31.87, and $32.64.
The Stock is Scorching, Yet Morgan Stanley Still Sees a 37.03% Upside
Since July 21, 2022, several analysts have boosted or given price targets to PLUG that show considerable upside. Morgan Stanley gave the stock a $42.00 price target, representing a 37.03% upside from August 16, 2022’s $29.19 close.
Others, while not relatively as high as Morgan Stanley, see a substantial upside in their own right.
- Cowen- $35.00
- BTIG Research- $35.00
- Citigroup- $36.00
- Truist Financial- $32.00
- Susquehanna Bancshares-$35.00
- JPMorgan Chase & Co.-$32.00
- KeyCorp- $32.00
KeyBanc loves PLUG’s upside because the Inflation Reduction Act could provide “longstanding tailwinds to the clean hydrogen industry.” Susquehanna also loves the growing backlog in the Company’s electrolyzer business.
Based on Tipranks data, 18 Wall Street analysts offered 12-month price targets for Plug Power in the last 3 months. PLUG currently has a high forecast of $78.00, a low forecast of $25.00, and an average price target of $34.53. The average price target represents a 15.84% upside from August 16, 2022’s $29.19 closing price.
PLUG’s year-to-date low and high are $12.70 and $32.05, respectively.
MP Materials Corp. (NYSE:MP)
As the largest rare earth miner in the Western Hemisphere, the catalysts have this surging, strategically essential stock still staring at a potential 48.37% upside.
Even before the Inflation Reduction Act was a thing, President Biden pledged to make half of new U.S. automobiles electric by 2030.
Under the Inflation Reduction Act, the already existing $7,500 EV tax credit has a 10-year extension.
However, there’s a catch.
EVs only qualify if built after December 31, 2022, and tax credits are contingent on the EV’s sourcing and assembly.
One of those stipulations, insisted by West Virginia Senator Joe Manchin, restricts EVs from tax credits if they source rare earth metals from a “foreign entity of concern-” aka China.
With this stipulation starting in 2024, that’s precisely why MP Materials is not only one of the best stocks to buy now. It’s one of the best stocks to buy for 2032.
One cannot understate MP’s importance as the largest rare earth miner in the Western Hemisphere. Rare earths are critical for producing EVs and clean energy. Unfortunately, if China wants to, it can shut the entire thing down. China currently produces more than 85% of the world’s rare earths and is hoarding roughly two-thirds of the world’s total supply.
With a long-term contract to start providing EV magnets for GM engines, and a $35 million contract from the Department of Defense to refine heavy rare earths at its Mountain Pass, California facility, it’s clear that MP is only getting started. MP currently provides roughly 15% of the world’s rare earth supply and could soon see this figure soar.
Dive deeper into the MP’s earnings growth, fundamentals, and analyst upside. It becomes evident that this isn’t only a stock seeing an uptrend because of the Inflation Reduction Act. It’s a stock that surged 34.9% over the last month because serious long-term catalysts position it as one of the best stocks to buy now.
Jaw-Dropping Earnings Growth
MP Materials is one of the best stocks to buy now because its earnings and revenue continue growing at a breakneck pace. Its Q2 2022 earnings results on August 4, 2022, significantly beat both bottom and top line estimates and revealed outstanding year-over-year growth.
MP reported $0.43 EPS for the quarter, beating analysts’ consensus estimates of $0.33 by $0.10 and marking a 186.67% year-over-year increase. Revenue also came in at $143.50 million, compared to analyst estimates of $128.75 million, marking a 96.3% year-over-year increase.
The best part? Catalysts are mounting, and financial research platforms like Finbox project MP Materials’s net income to grow 122.2% and average 47.2% over the next five fiscal years.
Operating With Strong Cash Flows and Fundamental Strength
MP went public via SPAC, so it’s understandable why you might have concerns about MP’s fundamental strength.
Let’s say that once you do a deeper dive into MP, you can put all those preconceived notions to bed.
First, MP’s robust cash flows can sufficiently cover interest payments.
Second, the Company has a nearly perfect 8 out of 9 Piotroski Score, which indicates healthy Liquid Balance Sheets, Profitability, and Operating Efficiency.
Third, although MP does not offer a dividend, and the stock can be volatile, MP is immensely profitable and efficient. Consider the following margins:
Take a breath the next time you pull your hair out when the MP stock makes a volatile move. Understand that it serves a critical purpose for the United States and the Western world and has the fundamentals to back it up no matter what happens. That alone should ease concerns about it being the best stock to buy now.
A Unanimous STRONG BUY With a Potential 48.37% Upside
TipRanks calls MP a STRONG BUY because 7 out of 7 Wall Street analysts who offered 12-month price targets for MP Materials in the last 3 months rated it as such. MP has a high price target of $60.00, a low of $44.00, and an average of $50.00. The average price target represents a 34.88% upside from August 16, 2022’s closing price of $37.07.
Because Robert W. Baird was the most recent analyst to change coverage on MP by boosting its target from $45.00 to $55.00 on August 5, 2022, that $60.00 street-high target is probably a more realistic barometer at this point. The $55.00 price target represents a 48.37% upside from August 16, 2022’s close.
It sounds like one of the best stocks to buy now, rather than one to wait around on.
MP’s year-to-date low and high are $27.48 and $60.19, respectively.