If fuel cell company Plug Power (NASDAQ:PLUG) is ever going to swing to a profit and jolt the share price, evidence of that turn should start to become clear soon. PLUG stock has been stuck in the low $2 range for the better part of the last three years.
The stage is certainly set for such a long-overdue development. The company, now more than a couple of decades old, has never turned a full-year profit, and rarely turns a quarterly profit despite a steady stream of optimistic chatter from and about Plug Power. A handful of recent made deals and a couple of acquisitions may finally drag the organization over that hump.
On the flipside, if the light at the end of the tunnel doesn’t appear soon, it may time to concede it’s just not going to happen at all.
It was, when conceived, a brilliant idea. Although battery-powered vehicles were around at the time, they were woefully lacking in terms of range and convenience. Converting hydrogen gas into electricity was efficient and cost-effective, and best of all, clean. Unlike gas-powered automobiles and equipment, hydrogen fuel cells only create heat and water.
They’ve simply not caught on where investors felt they needed to the most, however.
Thank Tesla (NASDAQ:TSLA) and the fortuitously timed development of lithium-based batteries for that proverbial failure to launch, of course. Tesla CEO Elon Musk’s bigger-than-life insistence on mainstreaming battery-powered cars cast a shadow on hybrids and other alternatives. Moreover, with lithium providing more power per weight than traditional lead-acid or nickel-cadmium batteries, that approach to non-combustion vehicles proved just effective enough to become the preference.
There’s a glimmer of hope in the horizon, though. The premise has found its place, albeit a limited one thus far, and decidedly outside of the car arena.
Case(s) in point: Fuel cells have proven to be ideal sources of backup or emergency energy, for instance. Walmart (NYSE:WMT) has also tapped Plug Power’s GenDrive technology to power its forklifts at an import warehouse in Alabama. Amazon (NASDAQ:AMZN) is a Plug Power customer, too, as well as a major owner of PLUG stock.
Amazon’s investment may ultimately prove to be a brilliant one, even if not one with a quick payback.
Plug Power Approaching Profitability
Hydrogen fuel cells may never become the norm for passenger vehicles, but they’re finally catching on in a big way for material-handling companies. In May, StreetScooter announced it would build 100 delivery trucks powered by Plug Power’s ProGen engine for Deutsche Post DHL.
It’s not just ground-based equipment undergoing a revolution, though. Earlier this month Plug Power acquired Canada’s EnergyOr, which builds very light fuel cell engines that can be used in aerial vehicles. The specialized tech opens up a whole new sliver of the market: drones.
That pair of announcements appear to be two of the four that CEO Andy Marsh was touting in May, immediately after the company released some rather disappointing fiscal first quarter numbers. Ergo, two more are on the way.
The four combined developments may finally be enough to drag Plug Power out of the red. Analysts think so anyway.
While the pros are calling for a loss this year and next, for fiscal 2021, continued revenue growth may finally yield a profit of nine cents per PLUG stock share.
Admittedly, it’s not much, but relative to the current Plug Power stock price near $2.10, it’s a huge victory.
More important is the trajectory. Assuming Plug Power has finally figured out how to balance spending and selling at the same time the most logical customers have realized the advantages of hydrogen fuel cells, the profit divergence should widen going forward.
In short, it’s been a long couple of decades, but the fuel cell movement may have finally gelled well enough for Plug Power to turn regular profits.
Looking Ahead for PLUG Stock
In its defense, Plug Power isn’t alone in its struggle. Rivals Ballard Power Systems (NASDAQ:BLDP) and FuelCell Energy (NASDAQ:FCEL) have also agonizingly remained in the red despite investor confidence that both would also be well in the black by this point. Their joint struggle only underscores the notion that the impasse has had far more to do with the most promising fuel cell market just not being ready, rather than failures of any of these outfits.
The lack of support for fuel cell powered passenger vehicles was also something of a surprise for the industry.
Regardless, with the market finally fully ready for the right solutions, Plug Power is shaping up as a top provider. Discernible progress toward that 2021 profit expectation should be enough to move shares higher in the meantime.
It’s still not a bet to make blindly, but the risk-reward ratio that PLUG stock sports is quickly becoming a compelling one.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley.