The market for alternative forms of energy, particularly clean energy, will continue to grow. But not every company that latches on to the clean energy industry will thrive, much less survive. Can Plug Power (PLUG), a manufacturer of fuel cell systems, overcome its recent struggles?
The clean hydrogen and fuel-cell technology company company is set to report first quarter fiscal 2023 earnings result after the closing bell Monday. PLUG stock has fallen 25% year to date, trailing the 7.73% rise in S&P 500 index. The shares are down some 56% over the past twelve months, compared to just a 0.26% decline in the S&P 500 index. But this could be a buying opportunity if the company's “power play” sparks enough optimism for long-term growth.
Known for its hydrogen-based technologies including fuel cells and electrolyzer technology that split water into hydrogen, the company now wants to dominate the market for electric-vehicle charging stations. Earlier this month, the company unveiled a new high-power stationary fuel cell system that will charge electric vehicle (EV) fleets in a manner that solves obstacles such as grid power capacity restrictions and clean power requirements while reducing the strains on grid, including infrastructure upgrades and installations.
The question remains whether this offering can dramatically improve the company’s stock performance. The company, however, remains optimistic about its future prospects, forecasting annual sales of $5 billion and 30% gross margin for 2026. But in the near term, the company must show more progress in gross margin improvement for the stock to rebound.
For the three months that ended March, Wall Street expects Plug Power to report a per-share loss of 26 cents on revenue of $205.14 million. This compares to the year-ago quarter loss of 27 cents per share on revenue of $140.8 million. For the full year, which ends in December, the loss is expected to narrow from $1.25 per share a year ago to 69 cents per share, while full-year revenue of $1.34 billion would rise 91.7% year over year.
Founded in 1997, Plug Power manufactures fuel cell products -- the type that replace lead-acid batteries in vehicles and industrial trucks. A few of its large customers are those that have massive warehouses in which transport is required. As noted, the managed has forecasted annual revenue of $5 billion and 30% gross margin for 2026. These are ambitious targets, suggesting more than 600% growth above 2022. Whether the company can reach this goal remains to be seen.
The company has struggled recently with execution. In the most recent quarter, PLUG missed on both the top and bottom lines, with Q4 gross margin coming in at negative 36%. Although that was better than the negative 54% in the year-earlier quarter, it was overshadowed by the larger-than-expected quarterly loss. The performance in the company’s core business continues to suffer, with GenDrive unit sales down 35% year over year.
On the bright side, the service segment reduced gross losses by almost 50% from 2021 levels. The management also forecast Q1 third-party hydrogen supply costs to decrease by approximately 15% from Q4, outlining continued improvement over the course of the year. Investors are anxious to hear what the company has to say on Monday about its growth expectations for both the near term and long term.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
Read Richard's Bio