Plug in the power(NASDAQ: PLUG )When it was unveiled in 1999, a hydrogen-powered residential system seemed like a promising green energy play for developers. But the energy plan faltered because producing hydrogen was more expensive than producing oil or natural gas, making it cheaper to expand existing electricity. Instead of building a new hydrogen infrastructure, the grid.
In the two decades since the dot-com bust, Plug Power eventually pivoted to selling hydrogen fuel cells and forklift services in warehouses and fulfillment centers. That new business grew as it landed some big customers, but some major accounting errors — which forced it to revise all of its financial statements from 2018 to 2020 — drove away many of its investors.
The rise in interest rates crushed the speculation and cast a sharp light on the long-term losses.
Image source: Getty Images
Today, Plug’s stock trades 99% below its IPO price. It’s also down about 10 percent over the past 12 months as investors flee the market’s speculative stocks. Let’s see if it can go up or down next year.
They are Plug Power’s two biggest customers. Amazon(NASDAQ: AMZN ) And Walmart(NYSE: WMT ). It’s closed in on those two retailers, subsidizing fuel cell sales. Stock securities — Options to purchase additional shares at a discount.
That unusual arrangement turned Amazon and Walmart into Plug’s biggest investors, but the company didn’t say exactly how those incentives trumped other customer payments. That’s why Plug had to pay back all of its financing from 2018 to 2020. After restatements, earnings actually turned negative in 2020.
Plug revenue turned positive again in 2021 and grew over the next two years, but much of the growth was driven by two acquisitions that expanded its smaller cryogenic equipment unit rather than its core hydrogen fuel cell and charging systems business – still as of 2018. Macro headwinds have limited the market’s appetite for expensive new hydrogen projects. That slowdown, along with the high cost of integrating new acquisitions, caused net losses to widen at an alarming rate.
Measure
2021
2022
2023
9M 2024
Revenue (in millions)
502 dollars
701 dollars
891 dollars
437 dollars
Working margin
(87%)
(97%)
(151%)
(165%)
Net Income/Loss (in millions)
($460)
($724)
($1,370)
($769)
Data source: Plug Power
That pressure has intensified in the first nine months of 2024. For the full year, analysts expect Plug revenue to decline 20% to $714 million. However, it expects to narrow its net loss to $953 million by cutting staff, cutting costs and selling some of its equipment (on lease) to stabilize cash flow.
Plug Power is still the leader of the space. Hydrogen infrastructure market. It already has more than 69,000 fuel cell systems and more than 250 fueling stations deployed worldwide, and is the largest single buyer of liquid hydrogen. Orders from Amazon and Walmart should support its growth in the near term, and as the macro environment improves, it may attract more attention from other warehouse and fulfillment center operators.
However, the company is deeply unprofitable and is still issuing more shares to raise cash and cover stock-based compensation. It has increased its stock count nearly 426 percent over the past 10 years, and ended the third quarter of 2024 with $94 million in cash and $1.7 billion in total liabilities.
However, it probably won’t go bankrupt anytime soon. The US Department of Energy (DOE) threw out a lifeline last year with a $1.66 billion loan guarantee to build up to six new green hydrogen energy production facilities. Norway’s central bank, Norges Bank, raised its stake in Plug Power to nearly 8 percent last October.
Analysts expect Plug’s revenue to grow 36% to $969 million in 2025 and another 36% to $1.32 billion in 2026. With an enterprise value of $3 billion, it could look like it’s worth three times as much if sold this year. But these estimates may be a bit too optimistic, and the company still won’t come close to breaking even in the next few years.
If Plug Power trades at 3 times Wall Street’s expectations and sales, the enterprise value could be close to $4 billion by the end of 2025. That’s a nice rally above 30%, but it may struggle to achieve that. Profit if interest rates rise and the hydrogen market cools.
Despite insiders buying 12 times more shares than they sold over the past 12 months, the constant easing could limit near-term gains.
I personally expect Plug Power to outperform expectations in 2025 as the macro environment remains challenging for green energy companies. It may move lower and slightly higher in the next 12 months, but I don’t expect it to beat analysts’ estimates or outperform the broader market.
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John McKee, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the Motley Fool’s board of directors. Leo Sun It has places in Amazon. He has positions in the Motley Fool and recommends Amazon and Walmart. The Motley Fool has Disclosure Policy.
