Plug power (PLUG), a leading manufacturer of hydrogen fuel cells used in forklifts, recently saw its share price reach an everyday high amid momentum for renewable energy companies. But this high-flyer has tumbled from those levels and has just announced that he needs to review years of financial statements. Is PLUG shares a buy at the moment?
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Latham, NY-based Plug Power, supplies hydrogen fuel cells primarily for forklifts in large warehouses. Its fuel cells replace conventional batteries in electrically powered equipment and vehicles. Plug Power customers include retail giants Amazon (AMZN), Walmart (WMT), Nike (NKE) and Home Depot (HD). PLUG shares were launched in 2002.
Fuel cells cause a chemical reaction between hydrogen and oxygen from the air to produce electricity. Hydrogen storage systems can recharge within minutes instead of the usual hours for lead-acid batteries.
Currently, most hydrogen comes from fossil fuels, specifically natural gas. The extraction can also be driven by burning natural gas. Water is another source of hydrogen, and wind or solar energy can drive the extraction process, leading to even lower carbon emissions.
Plug Power plans to produce more than half of its hydrogen energy from completely renewable sources by 2024. It is also aimed at switching from forklifts to heavy vehicles to operate US and European ports, as well as stationary fuel cells to power data centers and distribution hubs.
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PLUG Stock Technical Analysis
Shares have been on a wild ride for the past few months. PLUG shares more than quadrupled from the U.S. election to an all-time high of 75.49 on January 26, while investors bet on green energy policies from a Democratic White House and Congress. Shares lost more than half of their value on March 5, as speculative growth names sold strongly. PLUG shares tried to bounce back, but met resistance.
PLUG shares fell after the market closed on March 16 as the company announced that the financial statements for the 2018 and 2019 financial years are being reviewed. Shares are not within buy range and do not currently form any base patterns.
The company said it has found accounting errors that are mostly related to non-cash items, including how it classifies some costs. Plug Power said it will also review quarterly submissions for 2019 and 2020. He added that no misconduct was detected.
“The revised accounting will change the way the company takes into account certain transactions and items, but it is not expected to affect the company’s cash position, business operations or the economics of commercial arrangements,” Plug Power said in a statement.
The company said previously declared targets remain unchanged, including gross invoices of $ 475 million in 2021, $ 750 million in 2022 and $ 1.7 billion in 2024.
Plug Power’s relative strength line declined from its highs in January, but is trending upwards again. Its RS rating is the perfect 99. With a mediocre composite rating of 54, Plug Power ranks 18th in the Energy-Alternative-Other industry group.
Fund ownership currently stands at 38% as a growing number of funds buy Plug Power shares. As of December 2020, 545 funds had PLUG shares, up from 405 in September 2020.
Rival FuelCell Energy (FCEL) is number 2 in the group with an RS rating of 99 and a composite rating of 85.
Ballard Power Systems (BLDP) and Bloom Energy (BE) are also fuel cell stocks in the group for alternative energy industries.
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Plug Power earnings and fundamental analysis
Plug Power’s losses per share increased to $ 1.12 from 7 cents in the previous quarter, well below the forecast for a loss of 8 cents per share. It had a negative revenue of $ 316.3 million, compared to a profit of $ 91.7 million in the previous quarter and worse than $ 84.9 million.
The large earnings loss was due in part to a sell-out among companies that exercised warrants they had in the stock. A warrant is issued directly by the company. When an investor exercises a warrant, the shares that meet the obligation are not received from another investor (as with options), but directly from the company.
Plug Power offered warrants to key customers such as Amazon and Walmart in exchange for fuel cells they purchased. In the fourth quarter, Plug Power discussed $ 456 million in costs, the majority of which are ‘non-cash costs related to the accelerated establishment of a customer’s remaining warrants,’ the company said in a statement.
As PLUG shares began to rise last fall, the warrants became more attractive to exercise. Plug Power said the client warrants program is new.
Plug Power received a record gross account last year, with $ 96.3 million for the fourth quarter and $ 337.4 million for the full year. The company also said it is on track to reach 2021 and 2024 targets. In January, the company raised its outlook for 2021 to $ 475 million from a previous estimate of $ 450 million. Looking further ahead, management has raised its 2024 target for gross invoicing to $ 1.7 billion, which is 40% higher than the previous outlook.
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Wall Street optimistic on PLUG stock
JPMorgan recently upgraded PLUG shares to overweight from neutral, while maintaining its price target at 65.
Analyst Paul Coster said in a March 1 note to customers that he expects Plug Power to have significant profitability in 2023-24, but the stock is currently trading at a multiple of pre-sales, which looks at around 33x, seems valuable. but not unreasonable in the context of valuations in the renewable and EV spaces. ‘
Right now, PLUG stocks are appealing to investors looking for the next big thing in renewable energy. Headlines are likely to retain interest in 2021, Coster said.
Part of the debate is about the use of hydrogen fuel cells among automakers. While Plug Power seeks to extend the use of fuel cells to more vehicles, some doubt its practical use in heavy vehicles such as semi-trucks. Tesla (TSLA) CEO Elon Musk has been an outspoken critic of hydrogen fuel cells, calling them unrealistic. But others – like General Motors (GM), Toyota (TM) and Nikola (NKLA) – is eager to take in hydrogen.
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Plug Power’s partnerships
The company recently announced that it is collaborating with the South Korean conglomerate SK Group. On February 25, SK Group closed its $ 1.6 billion investment in a joint venture with Plug Power to expand hydrogen energy in Asia. The joint venture should start this year.
The partnership will supply hydrogen fuel system systems, hydrogen stations and electrolysers to South Korea and other Asian markets.
“Plug Power has aggressively expanded the hydrogen economy in North America, and it is clear that our partner, SK Group, shares the same vision to expand a major hydrogen economy in Asia,” CEO Andy Marsh said in a statement. said.
The agreement comes on the heels of its partnership with French carmaker Renault to develop, build and market electric fuel cell commercial vehicles.
“We are looking for at least one additional ‘pedestal’ customer to be introduced (probably in Europe),” Coster said, adding that he believes the firm will have a large standstill in the second quarter of 2021 with a data center owner will announce.
“Management has also hinted at additional JVs and partnerships that will enable PLUG to enter additional geographic and end markets,” he added.
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Is PLUG Stock a buy now?
JPMorgan estimates that the overall market opportunity could exceed $ 200 billion. Plug Power raises capital to fund an ambitious expansion plan and partner with key players in the industry.
But it has yet to prove that it can achieve profitability. This may be due to the fact that he is currently supplying fuel cells for only one vehicle – forklifts. Although he plans to manufacture hydrogen fuel cells for other industries, a wait-and-see approach is probably wiser.
In short: PLUG shares are not currently a buy, as they are trading below the 50-day line without any visible pattern. Shares fell well below their 50-day moving average at the end of February, following the company’s report that there was strong negative revenue.
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Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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