Plug Power (NASDAQ:PLUG) is having itself a year. To be precise, Plug Power stock is up more than 430% in the last six months. After five years of watching the company’s stock tread water, investors in the manufacturer of hydrogen fuel cells have been rightfully rejoicing.
And if you’ve been on the sidelines during this run-up, you may have some fear of missing out. But before you indulge that fear, it’s important to take stock (no pun intended) of both the good and bad surrounding Plug Power stock.
The Race Is On
I’m not referring to the numerous companies that are attempting to bring a novel coronavirus vaccine to market. That race is ongoing as well.
I’m referring to the race for supremacy in the renewable energy field. Specifically, are you team batteries or fuel cells? I know it’s not necessarily a binary choice. But momentum is building on both sides.
The electric vehicle (EV) bubble is being expanded by improvements in battery technology. This is a crucial piece to making an EV future possible. Currently batteries dominate the clean energy transportation space. And Tesla (NASDAQ:TSLA), with its lithium-ion batteries, represents a significant threat to fuel cell technology in general.
And in terms of passenger cars, fuel cell technology lags behind. Nevertheless, fuel cell technology is finding its way into niche markets. In fact, one of the reasons for Plug Power stock’s recent surge was expansion of its ongoing contract with Walmart (NYSE:WMT). Walmart has been using Plug Power fuel cells in its forklifts for years and now may be expanding the applications for the technology.
I chose the analogy to a Covid-19 vaccine because, like the vaccine, the fuel cell versus electric battery debate will likely not be an “either or” but a “both and” situation. However, the fact that fuel cells are entering the debate is bullish for Plug Power.
But entering the debate won’t be enough. Right now Plug Power sees its addressable market as being about $30 billion. But as Faizan Farooque recently wrote, that $30 billion is a drop in the bucket compared to the broader EV market which is expected to climb to more than $800 billion by 2027.
Revenue Is Increasing
In the company’s most recent earnings report it saw an 89% year-over-year increase in net revenue. And Matt McCall recently told InvestorPlace readers that analysts are bullish on the company’s future revenue:
Analysts expect revenue to ring in at around $324 million this year, up nearly 37% from 2019… What’s more, in 2021, analysts expect another strong year of growth, up almost 36% to $440 million.
In the same article, McCall commented that the outlook for 2022 is for revenue of more than $567 million.
Profit Remains Elusive
There are several cautionary notes about Plug Power stock. But perhaps the biggest caution with the stock at its current level is the company’s lack of profitability.
To be sure, the needle is heading in the right direction. The company expects to be EBITDA profitable by the end of 2024.
As Mark Hake points out, EBITDA profit is not the same as net income profits or cash flow. Nevertheless it would be the beginning. And with Plug Power projecting larger revenue in the coming years, it may meet this objective earlier.
A Low-Cost Way to Test Plug Power Stock
What goes up frequently goes down. And when the reality of developing renewable energy collides with the expectation for renewable energy stocks, things may not end well. Still it’s hard to not take a position in hydrogen fuel cells. But it’s not a sector to enter into without your eyes wide open. There are no sure things at this point.
For my money, I think you can look at one of the many clean energy exchange-traded funds (ETFs) as a way to gain exposure to this sector without putting all your chips in with a handful of equities. One ETF that offers significant exposure to Plug Power stock is the iShares Global Clean Energy ETF (NASDAQ:ICLN).
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.