Plug Power (NASDAQ:PLUG) has frustrated investors for a very long time. It reached split-adjusted highs of over $1,500 per share during the dot-com boom. However, the dot-com bust and a subsequent loss of interest in fuel cells took it as low as 12 cents per share in 2013 and back below $1 per share as recently as 2017.
However, investors have seen a resurgence in hydrogen fuel cells. Given the investor interest from companies such as Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), Plug Power likely leads the way in the hydrogen fuel cell industry.
This interest could make the equity worth a speculative investment.
Company Could Benefit From a Fuel Cell Revival
Back in October, I referred to Plug Power as a “speculative buy.” From a certain point of view, one can call the company the Tesla (NASDAQ:TSLA) of fuel cells. However, for a long time, fuel-cell power has taken off only in niche areas, recently powering forklifts.
This has helped lead to a slow, albeit steady, climb in Plug Power. Share prices began the year at just above $1.50 per share and now have risen above the $3 per-share level.
However, the bull case has one critical challenge. InvestorPlace’s Vince Martin outlines this well, saying investors have to believe in the “this time is different” thesis. Countless investors throughout the ages have lost their shirt on such a belief. I have also cautioned readers on many occasions that such a viewpoint is a red flag. Thus, one can understand why Plug Power still trades at penny stock levels.
It also sells this low because of its balance sheet. For one, Plug Power loses money, and it does not forecast a profit on a consensus basis until 2022. Moreover, its debt of over $453 million far exceeds its equity and is not far below the approximate $750 million market capitalization. To provide more funding, it recently issued more shares to raise an additional $110 million. At current loss levels, that cash will last slightly more than one year. Hence, investors can count on more stock dilution in the future.
Perhaps Plug Power Is ‘Different’
But the bigger question is whether it is indeed “different” this time? I do not know, but I see enough signs to justify a speculative position. At its current price, investors should avoid all-in bets on Plug Power. However, comebacks do happen. I sometimes point to the example of American Tower (NYSE:AMT). American Tower once traded at 60 cents per share. It now trades above $210 per share and paid its shareholders 95 cents per share in its last quarterly dividend. Investors should not consider the occasional recovery “different.”
Also, Plug Power’s hydrogen fuel cell technology offers clear benefits. Hydrogen fuel cells tend to last longer than battery cells and recharge faster. Moreover, the National Renewable Energy Laboratory believes that hydrogen and renewable energy can leverage one another. Bryan Pivovar, a senior research fellow at NREL, believes the 2020s can become the “decade of hydrogen.” This could happen if automakers such as Toyota (NYSE:TM) and Fiat Chrysler (NYSE:FCAU), who already do business with Plug Power, add this technology to some of their automobiles.
The Bottom Line
Plug Power has made itself a potentially lucrative speculative investment. Given the one-time 99.9% loss in value, investors have good reason to mistrust an “it’s different this time” thesis in this company.
Still, other signs point to the potential for growth. Large companies have utilized fuel-cell power and have invested in Plug Power itself. Moreover, automakers have looked into powering cars with fuel cells.
Admittedly, investors should only invest in Plug Power with speculative funds. Losses will continue for years, and it will likely rely on stock issuance to fund itself for the foreseeable future. However, if hydrogen fuel cells become a more utilized power source, Plug Power should fuel investment portfolios accordingly.
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.