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Will Amazon's Plug Power Stake Buyout Fuel Long-term Growth?
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Amazon.com, Inc. (AMZN - Free Report) has put its faith and cash into hydrogen fuel cell maker Plug Power Inc. (PLUG - Free Report) , signing a multi-year contract that involves equity investment and a supply agreement.
Amazon to Buy 23% of Plug’s Share, Spend $600M
Per the deal, Amazon holds the right to buy 23% (55,286,696 shares) of Plug Power shares for $1.1893 per share. The price is based on Plug Power stock’s volume weighted average closing price for the last 30 trading days ended Apr 4, 2017.
Amazon will also have to spend $600 million over the life of the agreement. Against this multi-million spending, Plug Power will sell fuel cells and hydrogen technology to Amazon for use at its fulfillment centers.
Amazon will use Plug Power’s GenKey technology to power its industrial equipment such as forklifts to speed up charging, reduce cost and promote energy efficiency at the fulfillment centers. This year, Amazon will invest $70 million in the deal, which is expected to double next year.
Will Amazon’s Investment Streak Lead to Profits in the Long Run?
The deal shows that Amazon continues to pour cash into fulfillment centers. The company is also investing heavily in Amazon Web Services (AWS), video streaming, offline retail, logistics, India expansion plans and what not. Amazon’s global margins are already under pressure and are likely to be so at least for a few years.
But if we delve deeper into Amazon’s key investment areas, we see a futuristic approach. Amazon’s long history of execution, growing focus on innovation, technological prowess and huge cash balance, not only give it the flexibility to pursue growth in any area that exhibits true potential but also to create value for investors.
The company developed AWS, its cloud computing unit, for over two years. The unit handled the company’s own storage needs before its services were offered to third parties. Today, it's a multi-billion-dollar business and the cash cow for Amazon.
The business generates much higher margins than retail. As far as Prime and Amazon Marketplace are concerned, both have plenty of room for international growth and the company is investing both time and money to expand them.
Notably, the stock has gained a gigantic 60522.7% against the Zacks Internet Commerce industry’s growth of 499.8% since it went public. We believe this uptrend will continue in the years to come backed by Prime, Amazon Marketplaceand AWS.
The stock achieved the sixth consecutive record close at $909.28 in Wednesday’s trading.
Amazon CEO Jeff Bezos yesterday stated that he is spending $1 billion a year to get his space company Blue Origin ready to take tourists to space as soon as next year. Given Amazon’s continuous efforts to diversify, we won’t be surprised if we see Amazon and Blue Origin merging someday, opening up an entirely new market for the company.
Plug Power Yet to See Profitability
Plug Power has been incurring losses since it went public in 1999. It will be interesting to see whether the recent deal turns its fortunes around.
Meanwhile, the company’s shares are skyrocketing and were up 73% in Wednesday’s trading. Notably, the announcement of the deal boosted shares of other companies in the same space. FuelCell Energy was up over 5%, UQM Technologies climbed over 4% and Capstone Turbine gained about 2%. This could be an indication that investors expect the deal to benefit the fuel cell sector as a whole.
Plug Power’s GenDrive fuel cell is already popular and has been adopted by the likes of Wal-Mart (WMT - Free Report) , The Home Depot (HD - Free Report) , BMW and Carrefour Group. The company installed 4,010 GenDrive fuel cell units in 2016, which exceeded its previously issued annual guidance of 3,800 to 4,000 units for the year. Now, with a multi-year supply agreement with Amazon, the company may well be in a position to replicate its GenDrive success.
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Will Amazon's Plug Power Stake Buyout Fuel Long-term Growth?
Amazon.com, Inc. (AMZN - Free Report) has put its faith and cash into hydrogen fuel cell maker Plug Power Inc. (PLUG - Free Report) , signing a multi-year contract that involves equity investment and a supply agreement.
Amazon to Buy 23% of Plug’s Share, Spend $600M
Per the deal, Amazon holds the right to buy 23% (55,286,696 shares) of Plug Power shares for $1.1893 per share. The price is based on Plug Power stock’s volume weighted average closing price for the last 30 trading days ended Apr 4, 2017.
Amazon will also have to spend $600 million over the life of the agreement. Against this multi-million spending, Plug Power will sell fuel cells and hydrogen technology to Amazon for use at its fulfillment centers.
Amazon will use Plug Power’s GenKey technology to power its industrial equipment such as forklifts to speed up charging, reduce cost and promote energy efficiency at the fulfillment centers. This year, Amazon will invest $70 million in the deal, which is expected to double next year.
Will Amazon’s Investment Streak Lead to Profits in the Long Run?
The deal shows that Amazon continues to pour cash into fulfillment centers. The company is also investing heavily in Amazon Web Services (AWS), video streaming, offline retail, logistics, India expansion plans and what not. Amazon’s global margins are already under pressure and are likely to be so at least for a few years.
But if we delve deeper into Amazon’s key investment areas, we see a futuristic approach. Amazon’s long history of execution, growing focus on innovation, technological prowess and huge cash balance, not only give it the flexibility to pursue growth in any area that exhibits true potential but also to create value for investors.
Amazon.com, Inc. Net Income (TTM)
Amazon.com, Inc. Net Income (TTM) | Amazon.com, Inc. Quote
The company developed AWS, its cloud computing unit, for over two years. The unit handled the company’s own storage needs before its services were offered to third parties. Today, it's a multi-billion-dollar business and the cash cow for Amazon.
The business generates much higher margins than retail. As far as Prime and Amazon Marketplace are concerned, both have plenty of room for international growth and the company is investing both time and money to expand them.
Notably, the stock has gained a gigantic 60522.7% against the Zacks Internet Commerce industry’s growth of 499.8% since it went public. We believe this uptrend will continue in the years to come backed by Prime, Amazon Marketplaceand AWS.
The stock achieved the sixth consecutive record close at $909.28 in Wednesday’s trading.
Amazon CEO Jeff Bezos yesterday stated that he is spending $1 billion a year to get his space company Blue Origin ready to take tourists to space as soon as next year. Given Amazon’s continuous efforts to diversify, we won’t be surprised if we see Amazon and Blue Origin merging someday, opening up an entirely new market for the company.
Plug Power Yet to See Profitability
Plug Power has been incurring losses since it went public in 1999. It will be interesting to see whether the recent deal turns its fortunes around.
Meanwhile, the company’s shares are skyrocketing and were up 73% in Wednesday’s trading. Notably, the announcement of the deal boosted shares of other companies in the same space. FuelCell Energy was up over 5%, UQM Technologies climbed over 4% and Capstone Turbine gained about 2%. This could be an indication that investors expect the deal to benefit the fuel cell sector as a whole.
Plug Power’s GenDrive fuel cell is already popular and has been adopted by the likes of Wal-Mart (WMT - Free Report) , The Home Depot (HD - Free Report) , BMW and Carrefour Group. The company installed 4,010 GenDrive fuel cell units in 2016, which exceeded its previously issued annual guidance of 3,800 to 4,000 units for the year. Now, with a multi-year supply agreement with Amazon, the company may well be in a position to replicate its GenDrive success.
Zacks Rank
Currently, Amazon is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>