Plug Power’s first-quarter results were well received by stock market analysts. Net loss was USD 0.07, less than expected, while revenue surged 90 percent year over year, topping USD 29.1 million. At year’s end, earnings are expected to be between USD 155 million and USD 180 million. It has been reported that multiple new, and large, corporations were now part of Plug’s customer base. One of them is said to be a food company that ranks among the top five in the United States. Backlog remains strong. One caveat, though, is the net loss: USD 19.8 million, which included many non-recurrent items.
Overall, I’m not yet bought on Plug’s current strategy. Through a private debt sale, it is offering USD 100 million of senior convertible notes at 5.5 percent nominal yield. Some of the deal’s components, as in the right to exercise or convert the notes and the use of capital, are less than clear to me. The intent is to get 14 million shares off the market, which means that the deal will net Plug as little as USD 52.5 million, while it must pay USD 5.5 million in interest each year.
Plug (Nasdaq: PLUG) should focus on turning a profit from the strong, and growing, backlog. It is trading in the unfortunate sale and lease-back agreement with Walmart for more profitable arrangements with Amazon and Home Depot, which will get the company back on track. It is also very invested in improving its fuel cell stacks, aiming to offer more powerful units at cheaper prices. Nevertheless, those efforts should bring about a higher profit margin. In the end, that is what really matters.
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