We recently compiled a list of the 10 Best Undervalued Stocks to Buy According to Reddit. In this article, we are going to take a look at where Plug Power Inc. (NASDAQ:PLUG) stands against the other undervalued stocks. If interested, read our recent piece on the 10 Most Undervalued Stocks to Buy for Under $20.
Retail investors often discuss their investments on platforms such as Reddit and have become a major market force in recent years. According to a report, inflows from retail investors in the stock market between 2014 and 2019 averaged around $200 million, with a peak of $730 million in 2015. The figure spiked to $1.2 billion in 2020, with daily flows reaching $1.48 billion in 2021. Over the next couple of years, the value of inflows hovered between $1-1.4 billion per day, driven by commission-free online trading platforms and stimulus payments from the government. The surge in investor inflows is also owed to the pandemic, during which low interest rates and bond purchases by the Federal Reserve pumped heavy money into the American financial system.
The year 2024 has already been a healthy year for the American stock market, driven by a strong performance by technology stocks. Tom Lee, the co-founder and head of research at Fundstrat Global Advisors, is bullish on the ongoing fiscal year and anticipates the market to triple in size by the end of the decade.
The two major factors driving Lee’s bullish projection were the global labor shortage and a surge in the population of millennials. He mentions how millennials are the largest generation shaping the economy and are set to inherit big as we approach the generational wealth transfer of at least $80 trillion. According to a report, by 2030, millennials will have five times more wealth compared to what they have today. Moreover, the past two incidents of global labor shortage led to major spikes in technology stocks, and Lee is expecting the same again this time. However, he also warns of risks that could undermine his positive outlook, including AI backfiring, global recession, and geopolitical instability.
This uncertainty about the stock market, coupled with stocks’ volatility, makes it difficult for investors to ascertain the true value of the stock they want to invest in. American billionaire hedge fund manager, Bill Ackman, in May this year, discussed the current state of value investors and acknowledged that predicting the durability of a stock is far harder than building a financial model in the world of investment. Responding to a question about the use of AI to analyze stock investments and financial markets, Ackman stated that AI platforms might help in decision-making over the short run, but there is no guarantee that they would continue working over the long run.
Value investors purchase stocks they believe have a high value but their share prices do not reflect the stock’s actual worth, aiming to benefit when the market corrects itself. If the correct stocks are picked, it can lead to hefty returns for the investors through share price performance. One way of picking out the right stocks is noticing what the hedge funds are doing. Insider Monkey regularly covers top hedge fund stocks across industries for each quarter, and you can keep up with the information by following our website and subscribing to our newsletter. One such example is the 10 Best Aerospace and Defense Stocks to Buy Now.
Methodology
We went through several threads on Reddit to identify the most talked about top undervalued stocks according to investors on the platform. After gathering a list of companies, we went through a stock screener to verify that these stocks were undervalued. Then we sorted and listed the stocks in ascending order of how frequently they were mentioned on Reddit for being undervalued. In cases where two or more stocks were level on the metric, we outranked one over the other based on hedge fund sentiment about the stocks in question. Insider Monkey’s database of 920 hedge funds for Q1 2024 was used for that purpose.
Why are we interested in the stocks that hedge funds pile into? 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 Inc. (NASDAQ:PLUG)
Investors on Reddit that consider the stock undervalued: 3
Plug Power Inc. (NASDAQ:PLUG) is an American company that manufactures hydrogen fuel cell systems as a replacement for conventional batteries used in equipment and electricity-powered vehicles. Losses continue to dwarf the company’s revenue. During the first quarter of 2024, it posted a loss of close to $300 million as equipment sales dropped and the company awaits the commissioning of its electrolytes systems. The EPS was recorded at -$0.43, missing analysts’ expectations by 11 cents.
However, the company is optimistic that it can raise its revenue from a mere $891 million in 2023 to over $20 billion by 2030, citing the potential of the hydrogen economy, which has seen the Biden administration announcing to spend $7 billion last October in funding for hydrogen hubs across the United States. In May 2024, the US government awarded a $1.66 billion loan to Plug Power Inc. (NASDAQ:PLUG) for work on six green hydrogen production facilities.
According to Insider Monkey’s database, 17 hedge funds are bullish about the stock. There is consensus among analysts on the stock’s Hold rating, with an average share price target of $5.68, an upside of a staggering 82%. It is also one of the best undervalued stocks to buy now, according to investors on Reddit. In January this year, the company launched its new production facility in Georgia which has offered hope to investors of future growth. The new plant is likely to help Plug Power Inc. (NASDAQ:PLUG) ramp up its production to around 40 tons per day by the end of the year, from its current level of 15 tons. There are also plans in the pipeline to establish new facilities in New York and Texas, which is projected to bring down the cost of production to $3-5 per kilogram as per company forecasts.
The bear case for the company is that its business model still appears shaky from an investor’s perspective, considering that it depends heavily on Amazon and Walmart, its two largest customers, for its revenue. While both companies continue to be invested in Plug Power Inc. (NASDAQ:PLUG), whether or not that remains the case over the long run is uncertain.
Overall PLUG ranks 9th on our list of the best undervalued stocks to buy according to Reddit. You can visit 10 Best Undervalued Stocks to Buy According to Reddit to see the other undervalued stocks that are on hedge funds’ radar. 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.