Plug Power shares have tumbled a staggering 63% in the last 12 months to $2.67 today. But Dougherty & Co believes that the stock is destined to go up. Dougherty analyst Pierre Maccagno initiated coverage of Plug Power on Friday with a Buy rating, saying that the stock is “undervalued at current levels.” The research firm has a 12-month price target of $3.70.

Plug Power Inc Gets A Buy Rating From Dougherty

Plug Power has reached an ‘inflection point’

 

While the Latham, New York-based company posted a steep loss in Q4, 2014, Maccagno sees signs of improvement. Dougherty said that Plug Power has reached an “inflection point” for growth in the materials handling market, which is virtually unpenetrated. The fuel cell company is also focusing on adjacent markets by expanding its product offerings, customer relationships, and strategic partnerships.

Last month, the company signed a deal with FreezPak Logistics to supply its GenKey solution for FreezPak’s cold storage distribution center in New Jersey. Pierre Maccagno expects the company’s gross margins to expand. The fuel cell maker continues to lose money, but its margins improved from -39% in Q4, 2013 to -8% in Q4, 2014. Dougherty said Plug Power is lowering its products and services costs. It will help the company expand margins and reach breakeven by the end of 2016.

Plug Power targeting only specific markets

Plug Power is not going after every market. Instead, it has carefully chosen markets where fuel cells are more cost-effective and efficient than other alternatives. For instance, in forklifts, fuel cells can work continuously and recharge quickly, making them a better and cheaper alternative than batteries. The company has differentiated itself by focusing on markets where fuel cells have an advantage.

Plug Power ended 2014 with $146 million in cash and cash equivalents, up from just $5 million at the end of 2013. The company’s bookings rose by $100 million to $250 million. Separately, Plug Power is now selling its own branded T-shirts and sunglasses as its management gears up for a six-city tour to connect with customers, shareholders and strategic partners.

Plug Power shares fell 1.11% to $2.69 at 11:56 AM EDT on Friday.