Plug Power (NASDAQ:PLUG) stock is having a good year. In fact, based on PLUG stock’s recent history, you can say it’s having an amazing year. The company is scheduled to report earnings on Nov. 7, and the consensus is that earnings will come in flat.
In the case of PLUG however, flat earnings may be a win. The company has beat expectations in two of its last four quarters. And there are whispers that PLUG may be ready to post another earnings beat.
This is good news for a company that has a history of failing to deliver on bold promises. The company also recently announced an aggressive plan to achieve $1 billion in revenue and $200 million in adjusted EBITDA. Plug Power stock could triple if the company hit those targets.
That is a prospect that has investors excited. But does that mean now is the time to get in on PLUG stock? I argue that you should watch and wait.
2019 Has Been a Choppy Year for Plug Power Stock
There are times when I like to keep investing simple. Sometimes, the only question that needs to be answered is, what is the cost of doing nothing? In the case of PLUG stock, the question is what you will lose if you don’t jump on the stock right now. Here’s a graph that illustrates my point.
|Date||PLUG stock price/share||Date||PLUG stock price/share||% change|
Let’s say you were to have invested in 1,000 shares of PLUG stock on Jan. 2, 2019. Your shares would be up over 100%. If you didn’t jump in on Jan. 2, but you got in six months ago, the stock is still up over 10%. But if you didn’t buy on May 2, but got in on Aug. 14, your 1,000 shares would be up almost 35%.
I’m not advocating market timing. In this case, I’m advocating just the opposite. PLUG is a penny stock. Investors who bought 1,000 shares on Jan. 2 would be looking at a gain of $1,450 (not counting fees and expenses). I’m not dismissing a profit, but since March you would have to endure two corrections in a stock that prior to this year has mostly been a falling knife.
In other words, to get a modest gain from this penny stock, you’d have to either time it just right, or be willing to ride out some significant volatility.
There Is a Bullish Case for Plug Power Stock
In a recent InvestorPlace column, Vince Martin articulated the case for Plug Power stock. The plan comes down to the company getting it right in two areas.
First, the company is counting on continued strength and growth in its core Material Handling business. The company currently has contracts with major names that include Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), and Procter & Gamble (NYSE:PG). In fact, back in 2017, Amazon purchased the right to buy 23% of Plug Power. While that hasn’t done much for the stock, it does bode well for the stock to have an angel investor like Jeff Bezos supporting the underlying technology.
And that’s the real question for PLUG stock. Is there a viable market for their fuel cells beyond its core market? On that, things are less certain. The second part of their plan calls for the company to receive $200 million from fuel-cell powered vehicles the company is providing for DHL, a unit of Deustche Post (OTCMKTS:DPSGY). Assuming that comes to fruition, the company could hit its billion-dollar target.
A wild card in all this is if Toyota (NYSE:TM) follows through on rumors that they are considering using the company’s fuel cells for hybrid cars. But that’s a big if. Right now, the company just needs to concentrated getting as much market share as it can from the addressable markets it is targeting.
What’s the Harm in Waiting on PLUG Stock?
Plug Power has a five-year plan. And with less than 2% of their addressable markets in play to achieve success, there’s reason to think that they reach their goals. But the problem with five-year plans is there has to be something to give investors an incentive to take the journey with you. Right now, there’s no harm to waiting for PLUG to prove their plan is working before you jump in.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.