Plug Power’s (PLUG) ambition for green hydrogen energy continues to generate tons of excitement, but investors are still waiting for that excitement to show up in its stock price. PLUG has fallen 40% year to date, trailing the 14% rise in S&P 500 index. There’s an argument to be made that PLUG has gotten into oversold territory. We will get confirmation on that assessment in short order as the clean hydrogen and fuel-cell technology company is set to report third quarter fiscal 2023 earnings result after the closing bell Thursday.
The company has struggled recently with execution, but with its focus on societal value benefits of green hydrogen, its management believes the company has a bight future ahead. Recently, at its annual Plug Symposium at its Vista manufacturing facility in New York, they said they expect to generate about $6 billion in revenues by 2027 and $20 billion by 2030. Those are aggressive revenue targets, given that the company’s fiscal 2023 revenue projection is about $1.2 billion.
That means for the 2027 forecast to be achieved, Plug’s revenue would have to surge 400% in the following four years. In the second quarter, Plug Power reported revenue of $260 million, marking a 72% year over year growth. While the revenue growth total was impressive and reached a company record, the company also reported a record loss of 40 cents per share. The challenge has been with keeping costs down to boost the bottom line. For the stock to rebound the management on Thursday must find ways to boost gross margin.
For the three months that ended September, Wall Street expects Plug Power to report a per-share loss of 30 cents on revenue of $237.92 million. This compares to the year-ago quarter loss of 30 cents per share on revenue of $247.98 million. For the full year, which ends in January, the loss is expected to widen from $1.25 per share a year ago to $1.27 per share, while full-year revenue of $1.21 billion would rise 72.3% year over year.
The market for alternative forms of energy, particularly clean energy, continues to grow. While it is reasonable to expect not every company that latches on to the clean energy industry will thrive, PLUG has carved out a niche for itself and is poised to grow. Known for its hydrogen-based technologies including fuel cells and electrolyzers that split water into hydrogen, the company sees itself as the “leading provider of comprehensive hydrogen fuel cell turnkey solutions.”
While the company has struggled recently with execution, its management has brought Plug much closer to profitability. As noted, the company remains optimistic about its future prospects, forecasting 30% gross margin for 2026. These are ambitious targets, suggesting more than 600% growth above 2022. To boost margins faster, the company is also investing in its own green hydrogen plants to and expects to achieve positive gross margins in the fourth quarter.
Whether the company can reach this goal remains to be seen. But in the near term, its management is working to secure the necessary financing to grow and sustain the company by minimizing the weighted average cost of capital, while aiming for $1 billion in near-term liquidity in Q4. In other words, the profitability struggles are showing improvement, though the company reported a larger-than-expected loss of 40 cents per share in Q2.
For the stock to rebound, aside from a top and bottom line beat, investors on Thursday will want to hear more details about about the company’s profitability growth expectations for both the near term and long term.
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