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Here's Why Shares of Plug Power Soared 10% in January

Scott Levine, The Motley Fool

What happened

Shares of Plug Power (NASDAQ: PLUG) rose 10% last month, according to data from S&P Global Market Intelligence. The stock's movement in January represents a sharp turnaround from the 48% downturn it experienced through 2018.

Released on Jan. 9, Plug Power's business update for 2019 represented the main catalyst for the stock's jump last month. According to management, the company is poised to reach an inflection point -- one that will mark the company's achievement of sustained profitability. 

Wearing a red cape, a man in a suit flies above the clouds.

Image source: Getty Images.

So what

Investors may have been moved specifically by management's top-line forecasts. In 2018, for example, the company forecast gross billings of $182 million to $185 million, representing a 40% increase over what the company reported in 2017, and it sees 2019 gross billings of $235 million to $245 million. Impressive as the company's anticipated top-line growth may be, the more noteworthy figure relates to the company's projection farther down the income statement.

According to the presentation, management sees the company achieving positive adjusted earnings before interest, taxes, depreciation, amortization, and stock-based compensation (EBITDAS) in 2019. But it's not only the current year that looks profitable. Andy Marsh, Plug Power's president and CEO, said, "By the third quarter, the company is projecting continuous EBITDAS positive performance for our business."

In addition to Main Street, Wall Street was impressed with management's auspicious outlook. According to thefly.com, Carter Driscoll, an analyst with B. Riley FBR, reiterated a "buy" rating on the company's stock and assigned a $3.50 price target. Less bullish though still moved, an analyst at Roth Capital upgraded the stock from "sell" to "neutral" and reiterated a $1.30 price target.

Now what

Those familiar with Plug Power recognize that the promise of a black-hued bottom line is one of management's most popular refrains. Perhaps the most notable example was management's prediction in 2013 that the company would reach breakeven on an EBITDA basis by Q2 or Q3 2014. Missing the mark, the company reported an EBITDA loss of $84 million in 2014, according to Morningstar. Consequently, investors would be well served to be circumspect about management's EBITDAS forecast for 2019. 

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.