Plug Power (PLUG), a leading maker of hydrogen fuel cells, is trying to rebound as momentum in renewable energy lifts shares. Is PLUG stock a buy right now?
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Latham, N.Y.-based Plug Power supplies hydrogen fuel cells mainly for forklifts in large warehouses. Its fuel cells replace conventional batteries in equipment and vehicles powered by electricity. Plug Power clients include retail giants Amazon (AMZN), Walmart (WMT), Nike (NKE) and Home Depot (HD). PLUG stock went public in 2002.
The company aims to produce more than half of its hydrogen energy from entirely renewable sources by 2024. It also aims to branch out from forklifts to heavy-duty vehicles to serve ports in the U.S. and Europe, as well as stationary fuel cells to power data centers and distribution hubs.
Plug Power Earnings And Fundamental Analysis
On May 14, Plug Power restated 2020 revenue, adding $7.2 million to bring it to negative $93.2 million. It reduced 2019 revenue by about $300,000 and 2018 revenue by about $400,000. In 2020 losses widened by 10 cents a share to $1.68, while 2019 per-share losses remained unchanged and 2018 losses widened by 3 cents a share.
CEO Andy Marsh said the adjustments were non-cash and had no impact on business operations.
Plug Power announced it will require additional time to complete its quarterly review and reporting process for the first quarter of 2021. The company expects to file the Form 10-Q for the first quarter within the next 30 days and will hold an earnings conference call the day it files.
On May 20, Nasdaq notified the company, as expected, that it was not in compliance since it has not yet submitted a first-quarter report for the period ended March 31. Plug Power has until June 14 to submit the First-Quarter Form 10-Q. If it can’t make that deadline, it must ask for an extension on or before that date. If granted, the SEC could push the deadline to Sept. 13.
On May 10, Plug said it expects to report over $70 million in gross billings, up more than 60% from a year ago. It sees $67 million of net revenue, below analysts’ expectations for $79 million. In addition, Plug has over $5 billion of cash to fund future growth initiatives.
The company also provided its outlook through 2024. Plug expects its second-quarter gross billings to exceed $105 million, about 50% higher than the year-ago period. It expects to report over $102 million of net revenue, up 50% but below Wall Street forecasts for $106 million.
The company reiterated its previously disclosed annual gross billings targets of $475 million in 2021, $750 million in 2022 and $1.7 billion in 2024.
Last quarter, Plug Power’s per-share losses widened to $1.12 from 7 cents in the year-ago quarter, well below forecasts for a loss of 8 cents a share. It posted negative revenue of $316.3 million, down from a gain of $91.7 million in the year-ago quarter and worse than views for $84.9 million.
The big earnings miss was in part due to a sell-off among companies that exercised warrants they held in the stock.
Plug Power had offered warrants to key customers like Amazon and Walmart in exchange for fuel cells they bought. In Q4, Plug Power booked $456 million in costs, the majority being “noncash charges related to the accelerated vesting of a customer’s remaining warrants,” the company said in a statement.
As PLUG stock began soaring last fall, those warrants became more attractive to exercise. Plug Power said its customer warrant program has now been fully expensed.
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PLUG Stock Technical Analysis
The stock plunged on March 16, when the company said it was restating financial statements. Management cited accounting errors mostly related to noncash items, including how it classified some costs.
Plug stock jumped after releasing the restated financials. But it’s still a long way from its 52-week high of 75.49 intraday on Jan. 26.
PLUG stock along with other fuel-cell peers were dragged down further in early May, after Ballard Power Systems (BLDP) missed earnings and revenue estimates and raised doubts about the sector as a whole.
Shares gapped up, peeking above their 200-day line on May 28. But Plug Power shares are still not in buy range nor are they currently forming any patterns.
Third Bridge analyst Peter McNally says the accounting error raises a red flag.
“While some may view the restatement as backwards looking and simply a matter of accounting rules, Plug Power does have future targets that Third Bridge experts have questioned,” he said in an earlier email to IBD.
Plug Power’s relative strength line is trending upward again, after declining for several weeks. While its RS Rating is 97 out of a possible 99, its EPS Rating is just 7. With a Composite Rating of 44, Plug is ranked No. 13 in IBD’s alternative energy industry group.
Fund ownership currently stands at 36% as a growing number of funds are buying Plug Power shares. As of March 2021, 826 funds held PLUG stock, up from 570 in December 2020.
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Plug Power’s Partnerships
In April, oilfield supplier Baker Hughes (BHI) joined Plug Power and Chart Industries to establish a private fund that provides capital for large-scale, clean-hydrogen infrastructure projects.
On March 30, Plug Power said it planned to open a green hydrogen production plant in south-central Pennsylvania with Brookfield Renewable Partners. PLUG stock jumped 11% on the news. Construction is slated for the first quarter of 2022. The plant is expected to be online by late 2022.
Meanwhile, on Feb. 25, South Korean conglomerate SK Group closed its $1.6 billion investment into a joint venture with Plug Power to expand hydrogen energy in Asia. The joint venture should launch this year.
The partnership will provide hydrogen fuel cell systems, hydrogen fueling stations and electrolyzers to South Korea and other Asian markets.
“Plug Power has been aggressively building out the hydrogen economy in North America, and it is clear that our partner, SK Group, shares the same vision to build out a big hydrogen economy in Asia,” said CEO Andy Marsh in a statement.
That deal came on the heels of its partnership with French carmaker Renault to develop, build and market electric fuel cell light commercial vehicles.
On May 26, Plug Power teamed up with Johnson Matthey to develop a roadmap to accelerate the joint development of high-performance electrolyser technology with improved durability, performance, and energy efficiency.
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Growing Competition
McNally said Plug Power is effectively dependent on two customers, which makes the company’s situation fragile. “In addition, Plug Power is not the only company in this space that has been able to raise capital, so we expect stronger competition in the years to come,” he said.
Rival FuelCell Energy (FCEL) is No. 7 in the group. Ballard Power Systems and Bloom Energy (BE) are also fuel cell stocks in the alternative energy industry group.
Plug Power is making strides to diversify. On April 29, Plug Power announced a plan to integrate its ProGen fuel cell engines into BAE Systems’ electric buses. The two companies will also work on developing hydrogen and refueling infrastructure to end-customers use points.
Meanwhile, automakers General Motors (GM), Toyota (TM) and Nikola (NKLA) are eager to embrace hydrogen too.
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Is PLUG Stock A Buy Now?
JPMorgan estimates the overall market opportunity could exceed $200 billion. Plug Power is raising capital to finance an ambitious buildout plan and forging partnerships with key industry players.
But it has yet to prove that it can achieve profitability. This is perhaps due to the fact that for now it supplies fuel cells for just one vehicle — forklifts. While it has plans to manufacture hydrogen fuel cells for other industries, a wait-and-see approach is probably more prudent.
Bottom line: PLUG stock is not a buy right now as it is not in a buy zone with no discernible pattern forming.
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Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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