The elusive $3 resistance level has frustrated Plug Power (NASDAQ:PLUG) stock holders for a long time, and with the company’s next earnings announcement coming up on Nov. 7, it’s understandable that this event is top-of-mind for PLUG stock traders.
In the grand scheme of things, however, Plug Power investors should pay particularly close attention to an ambitious and perhaps unrealistic plan which could be make-or-break for this fascinating little fuel-cell company.
First, we have to address the elephant in the room: the $3 level that Plug Power stock traders obsess over. PLUG touched that level in 2015, and then again in 2017, and again in October of this year. Much to buy-side traders’ chagrin, it was rejected each and every time.
And so, a blockbuster earnings result this month could conceivably give PLUG traders another chance to pierce that $3 ceiling. Personally, I think they’re attaching too much importance to that number, but I can’t stop obsessive-compulsive speculators on message boards from placing their pre-earnings bets.
In any case, we can’t ignore the earnings release, so here’s what’s expected: the consensus analyst estimate for the third quarter of 2019 is a loss of $0.07 per share along with revenues of $54.89 million, which would represent a 0.7% decline year-over-year.
Thus, the expectations are low for Plug Power stock; this is typical of a third-quarter earnings season in which analysts have continually set low expectations for companies, thereby setting them up for easy earnings beats.
That, I believe, would explain why so many companies have exceeded analysts’ earnings projections this season, and I wouldn’t be surprised if PLUG stock gets a post-announcement boost similar to what we’ve seen with so many other companies in the third quarter.
This could certainly deliver some upside for the Plug Power stock price in the short term, and it might even enable PLUG to breach that seemingly all-important $3 level.
Still, I wouldn’t attach too much significance to this earnings report, as we’re living in a culture of low expectations and artificially induced euphoria (there I go, pontificating again), so any pop could quickly fade, leaving hype-buyers holding the bag.
Big Plans for a Growing Market
Irrespective of short-term events, the long-term prospects for Plug Power appear to be strong as the company has established its presence in a fast-growing niche. Buying shares of the stock will always be a speculative bet, but I imagine that the share price will increase over time as the fuel-cell market expands.
Indeed, automobile manufacturers are finally starting to recognize the significance of the fuel-cell revolution. As reported in a research study authored by the University of California-Berkeley’s Jonas Meckling and Johns Hopkins University’s Jonas Nahm, Toyota (NYSE:TM) made a major commitment to fuel-cell technology while other automakers have jumped on the electric vehicle bandwagon:
“…Toyota announced to have only hybrids or fuel cells in its line-up by 2050. Jaguar Land Rover plans to only sell hybrids or EVs by 2020, Aston Martin (OTC:ARGGY) wants all models to by hybrid by 2025. By January 2018, carmakers had announced a total investment of USD 90 billion in EVs. Of that amount, USD 19 billion was committed by automakers in the US, USD 21 billion in China, and USD 52 billion in Germany.”
More important than any single earnings event, then, is Plug Power’s long-term plan to meet the demands of the expanding fuel-cell market. Concerning this, Plug Power’s long-term intentions were recently articulated in the company’s five-year plan, which is posted on the Securities and Exchange Commission’s website.
I’ll let you decide for yourself whether the numbers are realistic or just a pie in the sky:
“Plug Power… has rolled out a new five-year plan that will position the company to deliver on an annual basis by 2024 $1 billion of revenue, $170 million of operating income, and $200 million of adjusted EBITDA… Within its core market of material handling, the Company expects to generate annual revenue of approximately $750 million and sell more than 25,000 units annually by 2024, up from about $235 to $245 million of expected revenue in 2019, an increase of over 3X.”
When these figures were released, I recall seeing some folks laughing out loud (in some cases, they claimed to be rolling on the floor laughing) on the stock message boards I frequent. I must admit that a tripling in revenues by 2024 is probably too ambitious; still, if the company even manages to come close to that, I’ll be duly impressed.
The Takeaway on Plug Power Stock
Okay, so PLUG stock is a risky bet on any time frame; I won’t deny that. However, I have to respect the company’s unbridled ambition, which could eventually fuel a long-term upside for Plug Power.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.