Plug Power Stock Requires Seriously Long-Term Speculation
Fuel cells are one of the wonders of our age. They provide power silently, combining hydrogen with oxygen from the air to produce electricity. Water is also produced as a waste product.
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I have been following the field for a decade, especially Plug Power (NASDAQ:PLUG). But I haven’t invested a dime, because the source of the fuel needed to make the “hydrogen cycle” work right now is natural gas. Why use a second-order fuel when the primary fuel is so readily available?
But with the new decade comes new hope. Plug Power shares rose almost 8% in pre-market trading on Jan. 6, thanks to a $172 million order from an unnamed Fortune 100 customer.
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A decade ago, fuel cells were being touted for pollution-free transportation and silent back-up for electrical grids. I was republishing charts on a beneficent “hydrogen cycle,” solar panels powering electrolysis to separate hydrogen from water and the “pollution” watering plants.
Today the dreams are more limited. The new market is warehousing. Forklifts powered by fuel cells can increase productivity 15%, because they don’t have to be recharged, just refueled. Plug Power is now talking about achieving $1 billion in gross billings by 2024, and achieving profitability in 2022.
That would be huge. Plug Power sales for all of 2019 are expected to come in under $200 million. The company is consistently unprofitable and has less cash in the bank than it lost in 2018. As a result, the stock is worth just $1 billion. The company must continually sell new shares to stay afloat. PLUG stock opened for trade Jan. 6 at $3.43 per share, but the stock price has been as low as $2.50 as recently as early 2019.
The Bullish Case
The bullish case is that we’re entering the “decade of hydrogen,” as InvestorPlace’s Will Healy writes. With Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT) and other retailers increasingly breaking bulk at warehouses rather than having customers do it in stores, a new boom may be coming.
This would make Plug Power a long-term buy, writes Tom Taulli. He says it’s at an inflection point.
Luke Lango thinks this could be an $8 stock over the next five years, meaning investors would nearly triple their money. It’s a good speculative buy according to Will Ashworth.
The Bearish Case
The problem for me is we’ve heard this story before.
To get from here to profitability, Thomas Niel notes, Plug Power must continually sell new stock. It’s not just selling shares to the public. It’s offering warrants to its biggest customers.
Dilution is why Faisal Humayun remains cautious on Plug Power. The company’s big rally during 2019 must be balanced against the company’s past failure to deliver.
That’s why Ian Bezek says it’s time to pull the plug on Plug Power stock. Morgan Stanley, the company’s lead broker, recently put a $2.75 per share price target on the shares. When your own broker doesn’t see upside, what are you hanging around for?
The Bottom Line on PLUG Stock
Fuel cells are one of those great ideas that just haven’t worked out.
The gear works. The numbers don’t.
Still, I wouldn’t give up on Plug Power just yet. Its current goals are modest and achievable. If they do pan out, big profits are possible.
If I were 30 years younger, I might put a few hundred shares aside, knowing they could become worthless or they could become very valuable. But I’m not 30 years younger, so this is a path I’m not going to take.
Dana Blankenhorn is a financial and technology journalist. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.
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