Where Will Plug Power Shares Be in Three Years?

Plug-in power supply (NASDAQ:PLUG), a developer of hydrogen fuel cell systems, was one of the biggest boom-and-bust stories of the dot-com bubble more than two decades ago. The company went public on October 29, 1999 at a price of $150 per share, adjusted for the reverse split, and its stock increased nearly tenfold to its record high of $1,498 on March 10, 2000 .

But today, Plug’s stock trades for about $2 per share. A $10,000 investment in the IPO would only be worth $160 today. It briefly rose to the mid-60s during the meme stock buying spree in early 2021, but those gains disappeared for three reasons.

First, Plug Power’s growth slowed as the company posted heavy losses. Second, the company failed to file its 2020 annual report on time and subsequently admitted that it needed to restate all of its 2018 and 2019 financials, and it repeatedly misled its investors. And finally, Plug Power simply wasn’t generating enough revenue to cover its skyrocketing valuations.

Plug Power still faces a bleak future, but the stock looks cheap at less than double this year’s sales. About 27% of the company’s shares were still short selling as of April 15, and its insiders actually bought more shares than they sold over the last three months. So could the beaten-down stock make a major comeback in the next three years?

What has happened in the last three years?

Plug Power’s GenDrive is a hydrogen fuel cell system for electric forklifts, automated guided vehicles and ground support equipment. Its GenSure platform is a stationary hydrogen network solution for telecommunications, data center, transportation and utility customers. In addition, the company sells electrolyzer systems for building modular hydrogen generators, liquefaction systems for producing liquid hydrogen, pre-produced liquid hydrogen and cryogenic devices for storing and transporting liquid hydrogen.

To date, Plug Power has deployed over 69,000 fuel cell systems for forklifts and over 250 gas stations. Among the largest customers are Walmart (NYSE:WMT), Home Depot (NYSE:HD)And Amazon (NASDAQ:AMZN)all of which have tested hydrogen-powered forklifts in their warehouses and logistics centers.

Plug Power’s revenue rose 27% to $891 million in 2023, but that marked a slowdown from 2022’s 40% growth. Meanwhile, operating margins shrank as net losses grew alarmingly.

Data source: Plug Power.

The story goes on

During its fourth-quarter conference call in March, CFO Paul Middleton blamed this slowdown on the “chaos in the hydrogen fuel market,” which resulted in an “unprecedented number of industry fuel plant shutdowns throughout the year.” Middleton also admitted that it took “longer than planned” for Plug to expand its own hydrogen facilities.

That’s a dire situation for a company that ended 2023 with $635 million in current liabilities and just $135 million in cash and equivalents. It will likely try to raise more money through secondary offerings, but that has already happened almost tripled its share count over the last five years with its previous offerings and stock-based compensation.

What could happen in the next three years?

Plug Power expects the company to gradually reduce its losses by increasing its prices, reducing its workforce, consolidating its assets and streamlining its business processes. The company expects these actions to curb its near-term revenue growth, but also expects these improvements to increase its cash flow to positive levels this year. Analysts expect Plug’s business to develop as follows over the next three years.

Analysts’ consensus estimates. Data source: Marketscreener.

We should be skeptical of these rosy estimates, especially considering how often Plug Power has disappointed its investors over the past two decades. However, the company is still one of the pioneers in the US hydrogen fuel cell market, which Precedence Research predicts will grow at a compound annual growth rate (CAGR) of 60% from 2023 to 2032.

If Plug meets analysts’ 2026 revenue expectations and still trades at around double that, the stock could easily double or triple from current levels. If it successfully grows its business and cuts its losses faster, it could command a higher valuation and reap even bigger multibagger profits in the next three years.

I’m not saying that will happen, but Plug seems to have more upside than downside at these prices. Still, investors should check whether the company manages to limit its losses in the next few quarters before nibbling on the stock.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions at Amazon. The Motley Fool has positions in and recommends Amazon, Home Depot and Walmart. The Motley Fool has a disclosure policy.

Where will Plug Power shares be in three years? was originally published by The Motley Fool