Plug Power Was Already Too Expensive Before the Accounting Mishap

There is a good chance the accounting errors found in Plug Power’s (NASDAQ:PLUG) 2018 and 2019 annual reports and six quarterly reports from March 2019 through September 2020 will eventually get sorted. Unfortunately, if you bought PLUG stock on March 15, the day before the company issued a press release acknowledging the errors, you’re down more than 30%.

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Naturally, there’s been a tug-of-war between analysts insisting this is a case of investors making a mountain out of a molehill and those who feel it’s best to keep away until the smoke has cleared.

I get both sides. It’s never easy to evaluate why an accounting error happened, let alone if it’s expected to materially affect the company’s business. It doesn’t look like it will, but I’m not an accountant. 

And if you’re not an accountant, I suggest you hold off buying PLUG stock despite this decline. Here’s why. 

PLUG Stock Is Still Up 800%

Over the past year, Plug Power’s gained more than 850%. While that’s well off the 1,400%, it was up at one point; that’s still a massive return over 12 months. Further, it’s generated an annualized return of 153% over the past three years—also, a nice gain.

It still trades at 31 times sales, according to, with a market capitalization of $18.5 billion. However, page S-11 of the prospectus supplement dated Feb. 8, highlighting Walmart’s (NYSE:WMT) sale of 7.3 million shares, stated that 502.5 million shares were outstanding as of Feb. 5.  

That’s a market cap of around $15.6 billion, which is about what Google Finance has for its current value. InvestorPlace’s Tom Taulli reiterated on March 19 the company’s belief that its gross billings for 2021 will be $475 million, $750 million in 2022, and $1.7 billion in 2024. 

The company’s Q4 2020 shareholder letter (before the acknowledgment of restatement) explains that because of the accelerated vesting of a customer’s remaining warrants (I’m assuming it’s Walmart), it had $456 million in additional costs in the fourth quarter, most non-cash charges related to those warrants.

As a result, it had Q4 2020 revenue of -$316 million and full-year revenue of -$100 million. 

In the future, it suggested that the revenue line should be much easier to follow for investors. I should hope so.

In the meantime, how does one evaluate the company when a simple thing like sales isn’t even straightforward? That’s a tough one.


As stated in the shareholder letter, PlugPower had Q4 gross billings of $96.3 million and full-year 2020 gross billings of $337 million, a company record. They’ve come a long way. In 2014, they were just $64 million. 

The shareholder letter says the gross billings number includes equipment sold, services rendered, fuel sold, and power provided under power purchase agreements and the like. 

If you go back to 2014’s 10-K, you’ll see that revenues were virtually the same as gross billings at $64.2 million, so for this article, I’ll assume the same is true in later years.

That gives PLUG a current valuation of 46.3x gross billings or sales. Project that out to 2024, and the multiple falls to a much more reasonable 9.2x gross billings or sales. 

From this perspective, assuming it hits its targets, and that’s a big if, the valuation isn’t too outrageous given the innovation it’s aiming to deliver between now and then.

What Do the Analysts Think?

On the positive side of the argument, B. Riley analyst Christopher Souther believes this might be an opportunity for investors

“Given our view that this news does not change the historical or future growth trajectory of the company,” the analyst wrote in a note to clients, “We believe this is another piece of accounting noise that has created an additional buying opportunity in the stock.”

Souther maintained his buy rating and $70 price target. 

On the negative side of the argument, Truist Securities’ analysts believe that until the whole accounting ordeal is resolved, it sees little upside for PLUG stock.

In December, the last time I wrote about Plug Power, I suggested that interested investors wait until it fell into the low $20s or high teens before buying. Further, I felt it was appropriate for investors with an above-average risk appetite. 

However, I had no idea that it would run all the way to $75.49 before running out of steam. Now, ready to fall into the $20s, if you can pick some up, and you fit the risk profile, I’d follow the lead of Riley’s analyst and buy some. 

Long-term, I think it’s got potential. I don’t think it’s worth anywhere near $75. Especially not with accounting issues hanging over its head.  

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

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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