With electric vehicle stocks and their close cousins in alternative fuel, the contentious boundary between “bullish” and just plain bull can stretch thinner than the border between the two Koreas. The roll call of vehicle companies that can’t turn a profit runs practically as long as the sector list itself. Add to that another company unfettered by the shackles of profit: Plug Power (NASDAQ:PLUG), a maker of hydrogen fuel cell systems for forklifts and the like, and its overvalued Plug Power stock.
With irrational exuberance a bona-fide Wall Street religion these days, Plug Power stock is up more than 700% in 2020. Here’s the thing: That is over the top to a degree that would make sellers of the Brooklyn Bridge blush. Now of course, Plug Power is 110% legit; if anything, the company got off to a very rough start after dropping like a spent meteor from the $1500-per-share level in 2000.
As you’ve no doubt concluded, that kind of astronomical share price seems nowhere in sight today. But the question remains how far investors will drive up Plug Power stock heading into 2021. The climb this year has come with nary an interruption and as we’ll see, Wall Street is abuzz over the company in ways to suggest that no one’s about to yank away the punchbowl.
Plug Power Stock at An Eye-Popping Glance
With its third-quarter report on Nov. 9, the company disclosed gross billings of $125.6 million, which reflects year-over-year growth of 106%. That made for the best third quarter run in the company’s history and offered one more sign that Plug Power is ramping up to where it needs to be. Maybe. (Hang tight, you’ll see what I mean.)
But for their part, analysts seem convinced: Nine out of 10 call it a buy. Holy hydrogen, Batman! Think about some of the most established, monstrous, in-the-black companies and you’re not going to find that kind of unanimity in terms of analyst percentage. Apple (NASDAQ:AAPL)? 21 out of 39. Amazon (NASDAQ:AMZN)? 42 out of 49. Did I mention that Apple is the world’s most valuable company, worth an astounding $1.9 trillion?
Why, you could plug 170 Plug Powers into it and still have enough left over to buy an iPhone 12 for every living soul in Teaneck, N.J., and pay for a way to power them with hydrogen cells.
I have three words to describe this: Unbelievable, undeniable and (perhaps) unsustainable. I mean, for all those rosy numbers I just mentioned, the most recent earnings report was a miss, as in a big miss. Plug Power stock reported a loss of 11 cents per share compared to forecasts of 7 cents per share.
For those doing the math, that’s 57% off target. As for the last quarter, analysts once again project a 7 cents per share loss. I can see them, and investors, giving Plug Power another pass if the losses are greater. Don’t you wish the Vegas casinos would be just as jolly and generous if you rolled snake eyes instead of a seven?
Ignorance (Plus Some Good News) Is Investor Bliss
That’s exactly my point: When a company loses money, misses Street earnings forecasts and still continues to shoot up like a hydrogen-powered rocket, what’s behind it all? Go ahead and cite sales projections and “the future of the blah blah blah sector” all you like. For investors, heads in the clouds don’t equate to boots on the ground, and while faith in a stock can do wonders these days for a fledgling company, it can only go so far for Plug Power stock.
Yet shareholders looking for good news that they can sink their teeth into will pursue it with all the vigor of hungry sharks. And that news came on Nov. 24, when Plug Power announced it had raised about $1 billion to build a network of green hydrogen production facilities to supply vehicles that run on its fuel cells.
Never mind that Plug Power had to sell off some equity to do it, the kind of move I know many startup founders frown upon. If you own and love Plug Power stock, chances are you will ignore it and instead buy whole hog this line from the company’s press release delivered by CEO Andy Marsh: “This ideally positions Plug Power to accelerate the growth of the green hydrogen economy in the United States and globally, a job we wholeheartedly accept.”
“A job we wholeheartedly accept.” Sounds like a line from the 1966 spy tele-drama “Mission Impossible,” doesn’t it? Here’s another one, altered a tad for our purposes, and pray you it doesn’t happen: “This stock will self-destruct in five-seconds.” (Enough of Boomer-era TV references: Let’s return to the present.)
Taking a Gamble? Or a Calculated Risk?
Let me be crystal clear: I don’t doubt the staying power of Plug Power stock. Not one bit. But not for its current fundamentals. As I’ve written many times, the amount of devotion investors show for these “sans-a-profit” clean-energy vehicle stocks astounds me. You can even commit alleged fraud, own up to some of the evidence and force out your founder, as is the case with Nikola Corp. (NASDAQ:NKLA), and keep going.
The “penalty” for Nikola’s mischief? Your stock jumps 65% in two months and General Motors (NYSE:GM) announces its intention to move forward anyway on a 10-year business deal to supply your batteries. Did I mention the Nikola Two semi won’t go into production until 2013 — if at all? If your kid gets caught cheating on a geometry test, don’t yell at him: Get him a corner office and a six-figure job in EVs.
Thus, I can see why investors love Plug Power stock and will keep loving it. If a company that has all the integrity of bird droppings on your hat can succeed in the short term as a green vehicle player, a good one can, too. Plug Power is an honest outfit making real products that inspire industry faith, at a time when the new Biden administration will get behind its green-power cause.
Speaking of faith, continued investment in Plug Power demands that a smart investor do more than just believe. You must extrapolate the graph of business viability, not share price, into 2021 and beyond. Be patient; hydrogen fuel is the future, but it will take much longer to arrive than impatient market lemmings think. In the meantime, watch Plug Power stock carefully and follow the relevant, long-term news and quarterly reports: Indeed, stay plugged in.
On the date of publication, Lou Carlozo held long positions in TSLA and AMZN.