Founded in 1997, Plug Power (NASDAQ: PLUG) is an American company that develops hydrogen fuel cells to replace conventional batteries for fleet vehicles, UAVs, and industrial robotics. Since June of 2020, Plug Power's stock has been gaining having firmly left its penny stock status behind. So, what is it about Plug power that is interesting to new investors, and is it a good investment right now?
Plug Power was ahead of the curve for hydrogen fuel cells as it created the world's first commercially viable market for hydrogen fuel cell (HFC) technology. Thus the company has deployed more than 40'000 fuel cell systems for e-mobility, which is more than anyone else out there. The EV market megatrend is currently gripping the globe and this industry is becoming a lucrative opportunity.
Plug Power's latest earnings report posted a strong balance sheet with over $5 billion in cash with which it is planning to fuel its global growth strategy. Additionally, the company is on track to deliver on its recently raised 2021 to 2024 financial targets
The company's first quarterly report for the fiscal year 2021 will soon be announced and expectations for the hydrogen power company are high. It has a predicted EPS of -$0.08, whilst net sales revenue is expected to come in at $68.13 million, up 66.95% year-over-year (YoY).
Plug Power also recently announced a deal that will allow it to dive into the world of busses. Partnering with BAE systems, they will collaborate to provide 'heavy-duty transit bus OEMs' with zero-emission powertrain systems. Busses are a massive market worth $38.2 billion in 2020 and growing at nearly 10% a year. With this in mind, Plug has also recently signed an agreement with the French auto dealer 'Groupe Renault' with whom they will help build a fleet of hydrogen-powered delivery vans and busses.
There are a lot of contrasting opinions on this stock so it can be quite confusing to gain a balanced view of the company as a whole. People seem to love it or hate it. However, there are a few good reasons for the lack of love for this stock.
Plug Power is notoriously unprofitable, the company lost nearly $70 million in the fiscal 2018 whilst it lost over $50 million in 2019. 2020 saw a huge increase of $550 million in operating losses, which is attributed to a customer program of accelerated vesting of remaining customer warrants. Now, this is complete, the forward-looking quarters should see a significant decrease in losses of this type.
The company also carries some debt, and whilst COVID-19 has a detrimental effect on many businesses, Plug Power has a current total liabilities of $236 million. This is up almost 60% YoY. With many projects on its books, any successes will be overshadowed if Plug does not sort its financials out sooner rather than later.
With an increasing number of competitors out there, Plug's unprofitability could prevent it from keeping up in the EV market.
Whilst the bear case is very small, it does not make it any less important. This company is hugely unprofitable and if it does not sort its finances out soon, the momentum that it has picked up over the last year might fizzle out.
However, Plug Power does have a lot going for it too. It has been around for a long time, pretty much creating the market for hydrogen fuel cells. Additionally, it has entered into partnerships that should sustain its business for the next few years at least.
This is a risky stock, it has momentum now, but it could just as easily slip back down into penny stock territory again. Investors who are risk-averse should steer clear. But those who like the sound of this company and who don't mind risk might be intrigued by Plug Power's potential.
In October 1999 Plug Power went public, meaning that this company has been public for 22 years.
In October, 1999.
It is expected at the end of June, 2021.
Mutual fund holders account for 33% of the company, with other institutional shareholders making up another 18.6%.
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