Plug Power (NASDAQ:PLUG) has lost some of its momentum lately. Since late November, the shares have gone from $4 to $3.14 — or off around 20%.
But it’s important to note that Plug Power has still had a stellar 2019. Keep in mind that the return is still a red-hot 150%.
Plug Power, which is a leading fuel cell provider, has been around for over 20 years. Yet, the stock has been mostly a loser during this time. For the past ten years, the average annual return is nearly a horrible -8%!
All in all, the adoption has been painfully slow. Let’s face it, it is not easy to transition away from fossil fuels, which have remained quite affordable. There is also the nagging issue of creating a new infrastructure, such as with charging stations.
Yet despite all this, the fuel cell industry’s prospects are starting to look up. And yes, Plug Power appears to be getting an outsized share of the opportunity.
Still a Market
There are a number of benefits for using fuel cells; A few include water being its only environmental byproduct, silent usage and quick refueling.
As a result, large companies are looking to fuel cells as an alternative. Note that Plug Power has customers like Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT). One of the most popular use cases is forklifts, which represent a large global market.
Granted, for now, Plug Power’s progress is kind of lackluster, even with the customer traction. During the latest quarter, revenues increased by only 6% on a year-over-year and there continued to be cash outflows, as interest costs remain stubbornly high.
Additionally, Plug Power recently pulled off a secondary offering for $110 million. While this will be critical for operations, the transaction was still dilutive and was the main reason that the shares of Plug Power have suffered a selloff.
The Future for Plug Power
For the most part, I think it’s important to keep a focus on the long haul when it comes to Plug Power. The company is unique, as it is a comprehensive provider of fuel cell systems. It also has the advantage of plenty of experience, as it has deployed more than 28,000 units that have logged one billion miles. Oh, and the company keeps on snagging marque customers. For example, in the third quarter, Plug Power added Fiat Chrysler (NYSE:FCAU).
The company also recently announced a bold plan for growth. The goal is to get to $1 billion in revenues by 2024, which would be composed of $750 million in material handling, $200 million in on-road vehicles and $50 million in stationary power. There would also be $200 million in EBITDA and $170 million in operating income.
To put all this in perspective, Plug Power is expected to post revenues of between $235 million and $245 million this year. In other words, the company’s growth plan is certainly aggressive — and much can happen in the next four years. However, as seen with the interest in fuel cells from large companies, Plug Power’s plan may not necessarily be off-base.
If anything, Plug Power is essentially signaling that things may be at an inflection point. So, for those investors willing to look at the long-term and stomach the inevitable volatility, the stock could be an interesting speculation at its current levels.
Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.