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. This level of pessimism is something Plug Power (PLUG), a manufacturer of fuel cell systems, is working extensively to refute amid recent operating struggles.
The clean hydrogen and fuel-cell technology company company is set to report fourth quarter fiscal 2022 earnings result after the closing bell Wednesday. Over the past year, PLUG stock has lost 30% of its value, while the S&P 500 has given up just 6%. The shares are also down some 45% over the past six months, compared to just a 3% decline in the S&P 500 index.
However, long-term investors who have waited patiently for power play are feeling energized so far in 2023. Its shares have risen close to 20% year to date, besting the 4% rise in S&P 500 index. Although the company has struggled recently with execution, shares could go higher still, according to Manav Gupta, analyst at UBS. Citing the company’s potential in the green hydrogen industry as it "aims to be a one stop shop and market leader in the space,” Gupta initiated coverage of the stock a Buy rating and 12-month price target of $26.
From current levels of around $14 per share, Gupta’s target assumes an 85% potential premium. Gupta noted that Plug Power is in strong position to lead the clean hydrogen and fuel-cell market which could be worth as much as $10 trillion. In Q3, core material handling revenues were down year-over-year, while gross margin barely budged. On the bright side, the backlog — a predictor of higher future revenue — was higher. Investors are anxious to hear what the company has to say on Wednesday about its growth expectations for both the near term and long term.
For the three months that ended December, Wall Street expects Plug Power to report a per-share loss of 25 cents on revenue of $277.39 million. This compares to the year-ago quarter loss of 33 cents per share on revenue of $161.91 million. For the full year, the loss is expected to widen from 82 cents per share a year ago to $1.05 per share, while full-year revenue of $763.33 million would rise 52% 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. However, in the most recent quarter, the performance in the company’s core business suffered, reporting a Q3 adjusted loss of 30 cents which missed Street estimates by 3 cents.
Q3 revenue of $188.63 million came in roughly $60 million short of expectations, though it rise 31% year over year. Revenue and profits struggled as the company's bread-and-butter GenDrive shipments declined roughly 23% from the year prior, while hydrogen infrastructure installations fell about 20% year over year. But the company showed confidence in its guidance, which sent the stock higher.
The company forecasted Q4 revenues to rise 75% from the Q3, while reaffirming 2023 revenue forecast of $1.4 billion. The latter assumed meaningful growth in both the applications and energy/electrolyzer segments. The management also stood firm on its guidance for 2026 and 2030 revenue targets of $5 billion and $20 billion, respectively.
All told, the management continues to build for the future, while making the best of a bad economic situation. Plus, it appears that GenDrive units is starting to gain traction, given that management has maintained its guidance for 2023 and beyond.
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.
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