Many investors are once again paying attention to Plug Power (NASDAQ:PLUG) stock. After building relationships with some of America’s top companies, acquiring hydrogen fuel cell maker EnergyOr, and issuing positive second-quarter guidance, PLUG has made many people feel more optimistic about the company.
However, the euphoria has not directly impacted PLUG stock. PLUG stock price stands at about $2.20 per share, leaving this penny stock stuck in a trading range. Although many investors could rush to buy PLUG stock if it reports blowout Q2 results, traders need to treat Plug Power stock as a speculative play at best.
Plug Power Provided Strong Q2 Guidance
Plug Power announced in late June that it would have its best Q2 in history when it announces its earnings on Aug. 8. It anticipated that it would deploy about 2,000 fuel cells during Q2.
The company also said that it would meet its full-year revenue guidance of between $235 million and $245 million and would report positive 2019 EBITDA. After the company made these announcements on June 25, PLUG stock dipped and then rebounded to levels close to where it had traded before the news.
Fuel Cells Draw Greater Interest
In many ways, PLUG stock appears to be an equity that can move much higher. During the late 1990s tech bubble, Plug Power stock did indeed jump, as it once sold at around $1,500 per share on a split-adjusted basis.
However, reality eventually caught up with PLUG stock, and it closed at $2.28 per share on Wednesday. Unfortunately for the owners of Plug Power stock, companies and consumers have focused less on the hydrogen fuel cell power provided by PLUG and more on solar power and the battery power used in electric cars made by firms such as Tesla (NASDAQ:TSLA).
Although fuel cells are not being widely incorporated into passenger cars, they have become increasingly widespread in smaller vehicles used in industry. And PLUG stock was the focus of some attention in 2017 when Amazon (NASDAQ:AMZN) invested $600 million in the company, as it bought shares of PLUG stock and many forklifts powered by Plug Power’s fuel cells.
PLUG subsequently received orders for its products from Walmart (NYSE:WMT) and GE (NYSE:GE). Moreover, PLUG’s acquisition of EnergyOr, announced in June, should enable the company to generate meaningful revenue from makers of robotics and unmanned aircraft.
Additionally, Market Research Engine believes the fuel cell market will grow to $3.48 billion by 2025, representing a 13% compound annual growth rate. PLUG’s competitors, such as Ballard Power Systems (NASDAQ:BLDP) and Bloom Energy (NYSE:BE), are also well-positioned to benefit from the space’s growth.
PLUG Stock and Its Peers Remain Speculative
I stated in a previous article that Bloom has reported stronger financial results than PLUG. However, Bloom ‘s results aren’t really very strong either.
Still, given PLUG’s deals with Amazon and other top companies, one might assume that PLUG stock has performed well. However, PLUG stock has traded in a range since PLUG’s deal with Amazon.
Also worrisome is the growing supply of PLUG stock. Since 2011, the number of shares outstanding has risen from just 22.67 million to 245.8 million today. While the dilution of Plug Power stock has slowed since Amazon bought its stake, the high number of shares decreases the chance of a stratospheric rally like the one that occurred in the late 1990s. However, if the company’s Q2 results meet or beat expectations, PLUG stock price could rebound to nearly $6 per share , the level it last reached in 2014.
Should Investors Buy PLUG Stock?
PLUG stock has again become speculative. I was cool to the idea of buying Plug Power stock as recently as two months ago. Other than its relationship with Amazon, neither prominent new customers nor acquisitions have significantly affected PLUG stock price.
However, even if hydrogen fuel cells are never integrated into passenger cars, they are being incorporated into less widespread industrial vehicles. Further, the EnergyOr takeover has opened up new markets for PLUg, and that should benefit PLUG stock. Finally, analysts, on average, expect PLUG to be profitable in 2021 at the latest.
Analysis cannot predict the kind of euphoria that gripped PLUG stock in 2000 or alternative-energy stocks more recently. However, a strong quarter could at least take PLUG stock out of penny-stock status and perhaps back above its 2014 levels. While PLUG is still too risky for retirement accounts, its potential makes it worth speculating on.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.