Plug Power (NASDAQ:PLUG) has fallen about 17.6% from its peak at the beginning of September at $14.13 but is still up over 268% year-to-date. But the problem is PLUG stock is still plagued by one fundamental problem. The company is still losing money head over feet and draining cash flow.
The company has a lofty and often cited goal of making $250 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) profits by 2024 year-end.
But you should expect to see large losses until then.
Focus on Profits in 2024
This goal is four and one-quarter years from now. That is an eternity in the stock market. Expect to see more cash outflow from negative free cash flow and more capital raises until then.
And, as I pointed out in my last article on the company, this goal of making $250 million in EBITDA by the end of 2024 does not guarantee free cash flow. EBITDA profits are not the same as real net income profits or cash flow.
EBITDA does not include several major cash flow outflow items. For example, it does not include are capital expenditures, interest expenses, changes in working capital and tax expenditures.
These four items are major cash outlays even for companies with net income profits. In addition, EBITDA profits are not sufficient to allow the company to pay dividends. And it may not even prevent the company from making free cash flow or preventing it from having to raise more capital.
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So, I’m sorry, I just don’t get all the hype about PLUG stock. All you have to look forward to are more net income losses, more capital raises and more negative free cash flow.
Losing Money a Long Time
Plug Power has been losing money for a long time. You can see this in the chart at the right.
It shows that in the past 10 years Plug Power has grown revenue but also its net income losses.
So, although revenue has risen from $20 million in 2010 to a forecast of $304 million in 2020, losses have expanded as well. They have grown from $47 million in 2010 to more than $101 million estimated in 2020.
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However, you can see in the next chart on the right that earnings per share (EPS) losses have improved over the past 10 years.
The EPS loss was in 2020 was -$3.58 per share and the losses for 2020 are forecast to be 29 cents per share.
Maybe there is some hope for this company after all.
What to Do With PLUG Stock
This is a stock about which all the analysts are positive given that it is in a new popular field, renewable energy and hydrogen fuel cells.
The average price target for PLUG stock of eight Wall Street analysts reviewed by Marketbeat.com is $10.25. That means that they expect the stock to fall $1.40 from $11.65 where it was Sept. 25, or 12%.
But Barron’s says that analysts like the stock and are raising their price targets. They like that the company beat earnings estimates, that is, loss estimates.
For example, the magazine quotes Jeffrey Osborne of Cowen who says that the company “has continued to diversify into adjacent end markets leveraging its fuel cell stack and MEA technology.” He raised his target price to $12 from $9. MEA is short for membrane electrode assembly.
Plug Power is pursuing partners in the heavy-duty trucking business, like Nikola (NASDAQ:NKLA).
Maybe this new focus can produce profits soon.
I included the charts above to show you that despite what the company is saying now it has a terrible track record. What were they telling their investors all along? Wait another four years?
You get my point. Talk is cheap. Profits and free cash flow, especially in a new field where you essentially have to create the demand for the product, are hard to generate. Most investors should probably wait to see what happens first and then look for an opportunity.
On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Mark Hake runs the Total Yield Value Guide which you can review here.
