The Prognosis For Plug Power (NASDAQ:PLUG)

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Power is dangerous. It corrupts the best and attracts the worst. Power is only given to those who are prepared to lower themselves to pick it up." - Ragnar Lothbrok.

Today, we put Plug Power Inc. (NASDAQ:PLUG) in the spotlight for the first time. This alt-energy concern seems to have become a "battleground stock" in the analyst firm community. Its shares are heavily shorted even as there is little insider activity in the shares. The stock has lost some 80% of its value from its all-time highs early in 2021. Oversold or falling knife? An analysis of Plug Power follows below.

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Plug Power Inc. is based in New York. The company delivers end-to-end clean hydrogen and zero-emissions fuel cell solutions to a variety of end clients. This includes supply chain and logistics applications, on-road electric vehicles as well as the stationary power market. Products include its ProGen engines supporting light, medium, and heavy-duty electric vehicles as well as fuel cell solutions that can power forklifts and other warehouse machinery. Plug Power also supplies hydrogen fuel cell backup power solutions. It provides various hydrogen-based products such as mobile cryogenic solutions, hydrogen liquefiers, and electrolyzer hydrogen production products.

The company bills itself as the "leading provider of comprehensive hydrogen fuel cell (HFC) turnkey solutions." Some of its key customers include Amazon (AMZN), BMW, and Walmart (WMT). The stock currently trades just under $13.00 a share and sports a market capitalization of just north of $7 billion.

Company Website

The company posted its first quarter numbers on May 9th. Plug Power had a GAAP loss of 35 cents a share, nearly a dime below the consensus. Revenues rose nearly 50% on a year-over-year basis to $210.3 million, a few million above expectations.

The stock dropped on the quarterly results as the company's net loss increased from $156.5 million in 1Q2022 to a $206.6 million net loss in the quarter. As, or more concerning, net cash used for operating activities rose to $277 million from $210 million in the same year a year ago.

Five weeks later, the company's CEO did raise FY2023 revenue guidance to $1.3 billion, a tad over the consensus and reiterated the company could do $20 billion in annual sales by FY2030 in front of Plug Power's annual investment day. The company recently opened a plant in Georgia that will be the largest green hydrogen play in the world that utilizes electrolyzers. Management also plans to commission plants in Texas, New York and Louisiana later this year.

Since first quarter numbers were posted, five analyst firms including Morgan Stanley and BMO Capital have posted Hold/Neutral ratings on PLUG. Price targets proffered range from $7.50 to $15.00 a share. Meanwhile, 11 analyst firms including BTIG, RBC Capital and Piper Sandler have reiterated/assigned Buy/Outperform ratings on PLUG, several with downward price targets revisions it should be noted. Their price targets range from $12 to $22 while H.C. Wainwright has a ludicrous $78 price target on the stock.

Approximately 23% of the outstanding shares in the stock are currently held short. There has been no insider activity in the shares (either buys or sells) since July 2021. The company ended the quarter with approximately $1.37 billion of cash and short-term investments on its balance sheet against approximately $350 million of long-term debt. Plug Power Inc. is scheduled to report Q2 earnings post-market on Friday, August 2nd.

Plug Power lost $1.25 a share in FY2022 on just over $700 million in revenues in FY2022. The current analyst firm consensus has the company cutting losses to 87 cents a share in FY2023 as sales soared just over 80%. They see revenue growth in the mid-50s in FY2024 and losses falling to 30 cents a share. It should be noted there is a wide discrepancy of both earnings and revenue projections within the analyst community for next fiscal year.

The company is seeing some impressive revenue growth. Unfortunately, this did not translate to smaller losses or lower cash burn in the first quarter. Quite the opposite, in fact. If the analyst consensus is correct, this should start to change in the quarters ahead as a surge in revenues reduces losses and cash burn. Plug Power's leadership certainly is projecting a huge ramp-up in revenues in the years ahead.

While most analyst firms are still cautious on the stock, Northland Securities did upgrade the shares in mid-July to Market Outperform with a $22 price target. The analyst there believes Plug Power is "now on a clear path to cash flow generation, and the momentum is picking up with every incremental deal announcement." This upgrade came one day after the company won a big new order to deliver 100 MW of proton exchange membrane electrolyzers in Europe.

Personally, I believe Plug Power is a story to keep an eye on. However, I am not pulling the trigger on taking a small stake in the stock until the company makes some significant progress on the cash burn front. Investors will get more data points to digest when Plug Power reports second quarter results later this month.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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