Plug Power – Expectations vs. reality

Plug Power’s third-quarter results proved disappointing. The company said that the figures didn’t have any influence on its great prospects, considering a customer base which includes corporations as large as Walmart and Amazon. Their bookings are expected to top USD 600 million in the coming years. During the reporting period, Plug delivered 2,753 GenDrive systems for forklift retrofits, which generated USD 61.4 million in revenue. Current production capacity is at 15,000 systems per year, with 95 percent of them manufactured in-house. Ballard’s contribution has been reduced to a minimum.

Nine H2 filling stations went operational during the third quarter, making Plug Power (Nasdaq: PLUG) the business with the most refueling sites in the States. Bookings are said to have added up to around USD 44 million in the same period, bringing 2017’s total to USD 160 million while the year-end figure is expected to reach USD 300 million. I recommend a closer look at the numbers, considering the somewhat complicated process of issuing warrants in combination with capital raises. Based on my unproven assumption, their taxation will create losses on the books. However, should Amazon and/or Walmart convert warrants, that would be a horse of a different color. While it would make them shareholders, it would also provide Plug with capital – there’s really nothing bad to say about such a scenario.

The fourth quarter is said to deliver a boost in revenue and bookings. However, I am a bit cautious, even if Plug’s big customers promise good business. Some predictions made throughout 2017 had to be retracted. Surely, Plug will continue to benefit from a generally very positive attitude toward fuel cell shares, but businesses such as Ballard Power, whose extensive know-how may land it a partnership with another forklift truck manufacturer soon, seem to have much greater potential to reach breakeven and enter growing fuel cell markets.

Let’s wait for the fourth-quarter results and see whether the predictions by management will come true. Plug’s market cap is decent. Its relatively aggressive advertising is just a bit too much for my taste. First, the company should prove that – like Ballard – a good gross margin is not a lofty goal and that estimates match up to reality.

Risk warning

Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they may experience high stock volatility. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the content of this article reflects the author’s opinion only. This article focuses on mid-term and long-term prospects and not short-term profit. The author may own shares in any of the companies mentioned in it.

Written by Sven Jösting in December 2017

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