After years of failing to gain traction, Plug Power (NASDAQ:PLUG) stock could make a comeback. The hydrogen fuel cell company has seen its stock recover on a returning interest on its energy source. Now, many see the possibility of moving beyond the niche the company has developed in powering forklifts.
At just under $3 per share, it still has not escaped penny stock status. However, it could bring massive gains if it expanded into powering automobiles or other forms of transport. This prospect in itself could make it a profitable speculative play.
PLUG Higher after Years of Stagnation
PLUG stock has brought investor disappointment for about 20 years. Once a darling of the dot-com boom, the stock lost over 99% of its value when tech stocks turned south in the early 2000s.
Now, shares look like it might finally spring to life again. Since briefly falling below $1 per share, PLUG stock has risen to the $2.90 range. At around four-times sales, it has not become an expensive stock despite the move higher.
Moreover, the U.S. Department of Energy has long touted the attributes of fuel cells. They emphasize the higher efficiencies than combustion engines and the fact that they emit only water instead of carbon dioxide. More recently, Washington State University has partnered with Plug Power to improve both energy storage and transfer. The company needs to bridge this challenge to develop fuel cell-powered vehicles.
However, fuel cells have fallen out of favor in recent years, particularly in comparison to the battery-powered technology produced by Tesla (NASDAQ:TSLA) and other innovators.
Thus, PLUG has turned to the niche it has developed in forklifts. Companies such as Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT) have helped to make Plug Power the Tesla of forklifts. As Vince Martin points out, automakers such as Toyota (NYSE:TM) have expressed an interest in powering cars with the technology.
Will Plug Power Stock Ever Mature?
Still, 22 years after its founding, it looks like a startup financially. It posts massive revenue growth, but also significant losses that appear set to continue for years. Investors have bid it higher, hoping it might finally mature soon.
However, investors saw this movie before with PLUG stock. At the height of the 1990s tech boom, Plug Power stock traded at nearly $1,500 per share. It then went on to see a 1-10 reverse stock split as it lost 99.9% of its value. After such a loss, will another run-up occur all these years later?
As Martin said, the current stock price implies a lack of confidence. However, analysts forecast revenue growth of 27.4% this year and 30.2% the next. Such growth could lead to an eventual profit.
On the other hand, Wall Street also forecasts years of continuing losses. As of the last reported quarter, Plug Power held about $19.85 million in cash. As a company with just under $21 million in equity, it will have trouble issuing more debt as these obligations have now reached almost $355 million. Hence, it might have to dilute its stock further to keep its doors open.
The Case for PLUG Stock
I see PLUG stock as an excellent choice for a speculative play. For one, Plug Power can build on their niche in forklifts before a hoped-for move into automobiles occurs. Moreover, electric cars may not help the environment as much as some anticipate.
For one, the lithium batteries they require bring environmental consequences of their own. Secondly, producing electricity can require the consumption of fossil fuels or other environmentally friendly options. Finally, hydrogen is among the most abundant resources on the planet. All of these factors could lead to increased consumer interest in Plug Power’s fuel cells.
Moreover, if research efforts pay off, fuel cells could increasingly become the energy source of choice for cars. Such a change could make a massive surge in PLUG stock a real possibility.
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.