Plug Power’s Electrifying Surge Will Run Out of Juice in 2021

Plug Power (NASDAQ:PLUG) stock has been charged up lately. That might even be an understatement. At an 850% year-to-date gain, Plug Power stock is one of 2020’s biggest winners.

A hydrogen logo on gas station fuel dispenser. Plug Power stock
Source: Alexander Kirch /

A lot of factors have combined to give Plug Power this sensational performance. For one, traders have flocked to clean energy stocks this year. Plug Power stock also has enjoyed a boost from the novel coronavirus. Throw in the company’s financials improving a bit, and you had a recipe for massive outperformance.

Will the good times continue in 2021?

Slightly Profitable After 20 Years

Since the turn of the century, Plug Power has been trying to commercialize hydrogen and fuel cell technologies. Historically, it has never found much success though. Through 2019, Plug Power had never once generated a profit. This finally changed in 2020, when the company managed to grind out $24 million in positive EBITDA in a recent quarter. This is a notable achievement for the company, there’s no denying that.

However, $24 million of EBITDA is not even in the right galaxy to justify today’s $14 billion market capitalization for PLUG stock. Similarly, the stock is selling for 44x trailing revenues, which is utterly ridiculous. You can get fast-growing software companies with enviable profit margins for significantly cheaper than that. Plug Power would have to be one of the greatest businesses on the entire planet to justify anything close to the current share price, given its tiny revenue base and minuscule profits.

2020 Was Not an Inflection Point

The bullish case for Plug Power stock relies on the idea that the company has turned the corner. It’s finally figured out the magic formula for selling its forklifts at scale and profitably. If Plug Power could use this year as the springboard to much greater growth in coming years, maybe you could make sense of the current stock price.

However, as our Vince Martin recently noted, this is unlikely to be the case. When you look at Plug Power’s end customers, they’ve all enjoyed a massive Covid-19 boost. Think about companies like Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), and Home Depot (NYSE:HD) that have gotten a major lift from online shopping. That, in turn, has driven new demand for warehouse infrastructure, including forklifts.

However, this sort of buying should fall off sharply next year as the Covid tailwinds turn into a marked slowdown in e-commerce growth. And, as Martin noted, Plug Power’s customers already served 30% of the grocery market last quarter. So, it’s not clear what huge addressable market Plug Power may address.

Given the limitations of its products, Plug Power tends to serve a few specific types of customers. That, in fact, has been part of the reason why it has taken the company 20 years to reach profitability; Plug Power simply hasn’t reached a mass market.

The company can and is trying to address this via broadening its product line-up. It has raised tons of money this year and is starting to make acquisitions. In theory, Plug Power could become a leader in hydrogen in general, rather than just its core forklift business. However, we’re still in the early stages of that potential transition.

Plug Power Stock Verdict

I’ve been bearish on Plug Power in the past, and in recent months, that’s looked like a mistake. Clearly, at least in the short run, the PLUG stock bulls are on the right side of the tape.

When you look at actual business fundamentals, however, not a whole lot has changed to justify the recent stratospheric run. This is a company with a more than 20-year track record of poor performance, and it still hasn’t hit a meaningful inflection point. One year’s boost from the pandemic doesn’t magically justify this wild stock performance.

Be wary of the recent run-up in the stock price. Plug Power has been in the right place at the right time during this economic disruption. Additionally, hydrogen checks a lot of boxes for people in terms of trendy investments right now. Unlike so many of these new green companies, however, Plug Power has been around a long time and has already demonstrated the lackluster utility and economics of its core products.

A technology that hasn’t achieved commercial greatness for two decades so far isn’t likely to suddenly become a blockbuster hit tomorrow. Positive EBITDA is one thing, and credit to Plug Power for that, but the business is still tiny compared to its market cap.

All that to say, there are far better speculations within the electric vehicles and cleantech space than this name. Plug Power is issuing $750 million of stock to cash in on its recent good fortune. That’s a smart move, and traders should consider cashing in their positions in the name as well.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Ian Bezek has written more than 1,000 articles for and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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