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Surviving the slump, Plug Power (PLUG) looks charged up to achieve goals

To build giga-factory to produce proton-exchange membrane stacks for fuel cells and electrolyzers

Plug Power Inc. (NASDAQ: PLUG) has been around for more than two decades but the hydrogen fuel cell company mostly stayed on the slow track as it continued to face challenges. Of late, things have improved and the company is well-positioned to benefit from the ongoing shift to low-carbon energy sources, especially in the wake of the COVID crisis that is expected to set a new paradigm for energy consumption.

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Though the auto sector is witnessing a transformation in terms of adopting renewable fuels and new vehicle designs, it will take a few years for the opportunities to fully unfold. The hype over electric vehicles and the steady growth of that industry seems to be acting as a catalyst for hydrogen fuel cell companies. They also look to leverage the growing environmental awareness and clamor for non-fossil energy sources. That justifies Plug Power’s bullish outlook, projecting revenues of $1.24 billion in four years from now.

Recovery Hopes

By all means, the Latham, New York-based tech firm is badly in need of a stimulus, after languishing in the negative territory for long. The company has not generated profit in the recent past and barely created any value for shareholders for several years. Going by analysts’ assessment, Plug Power is probably at the threshold of a revival and the stock promises decent returns at the current value. The impressive billing growth in the most recent quarter, despite the unfavorable conditions, underscores that theory. So, no investor would want to ignore the consensus strong buy rating on PLUG.

The stock, which made a much-needed recovery earlier this year, pared a part of the gains this week after the company announced plans to sell its stock in a public offering to raise around $360 million. Shareholders are concerned that the offering would result in dilution of the existing shares. It is a measure aimed at easing the pressure on cash flow to some extent and taking forward the expansion plan.

Moving Ahead

Meanwhile, Plug Power is pursuing a growth strategy focused on capacity expansion through acquisitions. A few weeks ago, the company acquired United Hydrogen Group and Giner ELX as part of its five-year plan that targets a significant increase in green hydrogen by 2024. To support that, the company will be building a Giga-factory for proton-exchange membrane stacks used in fuel cells and electrolyzers. Obviously, the management will be aiming to achieve profitability earlier than initially estimated.

Plug Power Quarterly Revenue Trend

“We plan to be a large provider of green hydrogen, probably doing with some partners. Ultimately, when I look at it, who will use green hydrogen in the $69 billion hydrogen market today if green hydrogen is available at a competitive price. Now finally, Plug Power is really unique. We’re a leader in technology and the new energy economy for hydrogen,” said chief executive officer Andy Marsh during his interaction with analysts on the recent earnings conference call.

Loss Narrows

While Plug Power remained in loss in the June quarter, the bottom line improved from the year-ago period and beat the estimates. Loss narrowed to $0.03 per share from $0.08 per share last year, aided by record billings. Revenues rose 18% to $68 million and topped the Street view. The management expects the uptrend for the top-line to continue in the third quarter.

Check for latest earnings conference call transcripts

It’s been a long time since Plug Power’s stock withdrew from its peak, followed by a long period of lackluster performance when it mostly traded in single digit. However, the shares recently got a fresh lease of life and crossed the $10 mark for the first time in about a year. Their value more than tripled since the beginning of 2020.

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