Environmentally friendly companies continue to excel in today's market. Most noticeably, Tesla (NASDAQ: TSLA) has had a rocky start to 2021, down 2% year-to-date (YTD), but it remains the leader in the EV space. Investors looking to jump on board this growing EV megatrend before it's too late may want to consider Plug Power (NASDAQ: PLUG). With a market cap of approximately $15 billion, the stock is attracting a lot of interest from investors looking for the next big thing.
Shares of Plug Power are down almost 20% year-to-date after gaining almost 1,000% in in 2020, can the stock make a comeback?
The bull case for Plug Power
As long-term investors, we're always trying to spot the next megatrend in the market to hop on and ride for the next few years. If the past few years have taught us anything, it's that investors definitely see a future in the electric vehicle market, with the stock price of Tesla and competitors like NIO shooting up multiples in value.
Plug Power is a company that could definitely benefit from this megatrend too. The company designs and produces hydrogen fuel cell systems that replace conventional batteries in machinery powered by electricity.
Here are some of the other things we like about Plug Power:
- Growth: The company expects its billings to reach $1.7 billion by 2024.
- Top tier customer base: Plug Powers clients include Fortune 500 companies such as Amazon (NASDAQ: AMZN), Home Depot (NYSE: HD), Walmart, and Nike (NYSE: NKE).
Plug Power's partnerships
In early June, Plug Power and Renault declared that their partnership to build hydrogen-powered vans was underway and they will commence production by the end of the year. The two will also be installing hydrogen charging stations in Europe, supplying carbon-free hydrogen, and maintaining fleets.
In even more positive news, South Korean-owned SK Group closed a $1.6 billion joint venture investment with the company to expand hydrogen power in Asia.
The bear case for Plug Power
The company is notoriously unprofitable, turning out a quarterly profit just once in the last decade. Plug Power's revenue was -$316 million for Q4 and -$100 million for the full year. This negative revenue figure was due to the vesting warrants that the company gave in 2017 to Amazon.
By the end of 2020, Plug Power had $780 million in debt on its balance sheet which makes the company particularly vulnerable going forward.
Then, Plug Power reported a greater-than-expected loss in the first quarter of this year. It incurred a loss of $0.12 per share in Q1, compared to the $0.08 loss per share estimated by analysts.
The company also faces heightened competition from FuelCell Energy, Ballard Power Systems, and Bloom Energy.
So, should I buy Plug Power stock?
It's undeniable that Plug Power is smack-bang in the middle of one of today's biggest megatrends. Management also has a clear, near-term plan of hitting $1 billion in annual gross billings by 2024.
However, this figure won't be nearly as impressive if they don't rein in costs at the company. Rough comparisons could be made between the cash burn at Plug Power to Tesla, but the latter has demonstrated that it is finally getting a handle on its costs whereas the former has a long history of doing the opposite.
Quickfire round
What does Plug Power do?
They design and manufacture hydrogen fuel cell systems that replace conventional batteries in equipment and vehicles powered by electricity.
Where is the Plug Power headquarters?
Latham, New York, U.S.
Does Plug Power pay dividends?
No, Plug Power does not currently pay a dividend.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds no positions in Plug Power. Read our full disclosure policy here.
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