Plug Power (PLUG), a leading manufacturer of hydrogen fuel cells used in forklift trucks, has seen its stock price soar to peak levels recently amid the momentum of renewable energy companies. But this highflier has dropped from those levels and has just announced that it will have to re-present years of financial statements. Is the PLUG stock a purchase now?
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Plug Power, based in Latham, NY, supplies hydrogen fuel cells primarily to forklift trucks in large warehouses. Its fuel cells replace conventional batteries in equipment and vehicles powered by electricity. Plug Power customers include retail giants Amazon (AMZN), Walmart (WMT), Nike (NKE) and Home Depot (HD). PLUG’s shares became public in 2002.
Fuel cells cause a chemical reaction between hydrogen and oxygen in the air to produce electricity. Hydrogen storage systems can recharge in minutes, instead of the typical lead-acid battery hours.
Currently, most of the hydrogen comes from fossil fuels, specifically natural gas. The extraction process can also be triggered by burning natural gas. Water is another source of hydrogen, and wind or solar energy can fuel the extraction process, resulting in even lower carbon emissions.
Plug Power plans to produce more than half of its hydrogen energy from fully renewable sources by 2024. It also plans to branch out from forklifts to heavy vehicles to serve US and European ports, as well as fuel cells. stationary fuel for energy data centers and distribution centers.
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PLUG Stock Technical Analysis
The shares have been on a wild ride for the past few months. PLUG shares have more than quadrupled since the election in the United States to a record high of 75.49 on January 26, with investors betting on green energy policies from a Democratic White House and Congress. The shares lost more than half of their value on March 5, as names in speculative growth were sold hard. The PLUG stock tried to recover, but met with resistance.
PLUG’s shares plummeted after the market closed on March 16, when the company announced that it was restating the financial statements for fiscal year 2018 and 2019. The shares are not in the buying range nor are they currently forming any baseline pattern .
The company said it found accounting errors mainly related to non-monetary items, including how it classified some costs. Plug Power said it would also readjust the quarterly records for 2019 and 2020. He added that no misconduct was detected.
“The accounting review will change the way the company accounts for certain transactions and items, but it is not expected to affect the company’s cash position, business operations or the economics of trade deals,” Plug Power said in a statement.
The company said the previously set targets remain unchanged, including gross revenues of $ 475 million in 2021, $ 750 million in 2022 and $ 1.7 billion in 2024.
Plug Power’s relative strength line dropped from its highs in January, but is tending to rise again. Its RS rating is a perfect 99. With a mediocre composite rating of 54, Plug Power ranks 18th in the alternative-other energy industry group.
The fund’s ownership currently stands at 38%, as an increasing number of funds are buying shares in Plug Power. In December 2020, 545 funds held PLUG shares, up from 405 in September 2020.
Rival FuelCell Energy (FCEL) is No. 2 in the group, with an RS rating of 99 and a composite rating of 85.
Ballard Power Systems (BLDP) and Bloom Energy (BE) are also fuel cell stocks in the alternative energy industry group.
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Profit and fundamental analysis of plug energy
Plug Power’s loss per share increased to $ 1.12, from 7 cents in the same quarter a year ago, well below the predicted loss of 8 cents per share. It posted negative revenue of $ 316.3 million, down from a gain of $ 91.7 million in the same quarter a year ago and worse than views for $ 84.9 million.
The big loss in profits was partly due to a sale between companies that exercised the subscription warrants they had on the shares. The stock guarantee is issued directly by the company. When an investor exercises a subscription bonus, the shares that fulfill the obligation are not received from another investor (as with options), but directly from the company.
Plug Power offered guarantees to key customers like Amazon and Walmart in exchange for the fuel cells they purchased. In the fourth quarter, Plug Power posted $ 456 million in costs, most of which were “non-monetary expenses related to the accelerated acquisition of a customer’s remaining bonds,” the company said in a statement.
As PLUG’s stock started to skyrocket last fall, these bonuses became more attractive to exercise. Plug Power said its customer warranty program has been fully accounted for.
Plug Power recorded record gross sales last year, with $ 96.3 million in the fourth quarter and $ 337.4 million for the full year. The company also said it is on track to meet its 2021 and 2024 targets. In January, the company raised its forecast for 2021 to $ 475 million, from an earlier estimate of $ 450 million. Looking further ahead, management increased its gross revenue target from 2024 to $ 1.7 billion, an increase of 40% over the previous forecast.
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Optimistic Wall Street in PLUG stock
JPMorgan recently raised PLUG’s shares from neutral to overweight, maintaining its target price at 65.
Analyst Paul Coster said in a March 1 note to customers that he expects Plug Power “to impact significant profitability in 2023-24, but for now the shares are trading at a multiple of future sales, which at around 33x , seems highly valued but not irrational in the context of assessments between renewable energies and EV spaces. “
At the moment, PLUG’s shares attract investors looking for the next big thing in renewable energy. The headlines are likely to maintain interest in 2021, said Coster.
Part of the debate will be on the adoption of hydrogen fuel cells among automakers. While Plug Power seeks to expand the use of fuel cells for more vehicles, some doubt its practicality in heavy vehicles such as trucks. Tesla (TSLA) CEO Elon Musk has been a staunch critic of hydrogen fuel cells, calling them unrealistic. But others – like General Motors (GM), Toyota (TM) and Nikola (NKLA) – are eager to embrace hydrogen.
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Plug Power Partnerships
The company recently announced that it was joining the South Korean conglomerate SK Group. On February 25, SK Group closed its $ 1.6 billion investment in a joint venture with Plug Power to expand hydrogen energy in Asia. The joint venture is expected to be launched later this year.
The partnership will supply hydrogen fuel cell systems, hydrogen fueling stations and electrolysers to South Korea and other Asian markets.
“Plug Power has been aggressively building the hydrogen economy in North America and it is clear that our partner, SK Group, shares the same vision of building a major hydrogen economy in Asia,” said CEO Andy Marsh in a statement.
The deal comes in the wake of its partnership with French automaker Renault to develop, build and market light commercial electric fuel cell vehicles.
“We are looking for at least one additional ‘pedestal’ customer to be introduced (probably in Europe),” said Coster. He also believes that the company will disclose a major deployment of stationary storage with a data center owner in the second quarter of 2021.
“Management has also suggested additional JVs and partnerships that will allow PLUG to enter other geographies and end markets,” he added.
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Is PLUG Stock a purchase now?
JPMorgan estimates that the overall market opportunity could exceed $ 200 billion. Plug Power is raising capital to finance an ambitious construction plan and to enter into partnerships with key players in the sector.
But it still needs to prove that it can achieve profitability. Perhaps this is due to the fact that, for now, it supplies fuel cells for only one vehicle – forklifts. While plans to manufacture hydrogen fuel cells for other industries, waiting to see is probably more prudent.
In short: the PLUG stock is not a purchase at the moment, as it is being traded below its 50-day line, with no discernible pattern formation. The stock fell well below its 50-day moving average at the end of February, following the company’s report of sharp negative revenue.
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Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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