Plug Power: A Story of Rags Or Riches?

Plug Power added Airbus to its partner list to scale hydrogen solutions this week refueling the stock for take-off after a rocky 2021.

Oct. 18, 2021

Plug Power added Airbus to its partner list to scale hydrogen solutions this week refueling the stock for take-off after a rocky 2021.

Things are looking up for Plug Power (NASDAQ: PLUG) investors — for October at least. Plug Power added airplane manufacturer Airbus (CAC: AIR.PA) as a partner to expand its presence in the aerospace sector. 

Airbus stated that Plug Power: 

Will enable us to leverage their expertise to decarbonize airports while preparing them for the arrival of hydrogen aircraft by 2035.”

This indicates that Airbus is dedicated to a long-term relationship with Plug Power.

What is Plug Power?

Plug Power is a hydrogen energy company that wants to help businesses move towards clean energy and electrification. The business helps companies reduce their environmental footprint, reduce costs and improve productivity all at the same time.

Plug Power has been bundled with meme stock names over the last year or so, and is all too acquainted with the rise and fall that comes with investing in these types of companies. The stock ran up as far as $70 per share in January and then fell to just over $20 per share in May.

Bull Case

So there are a couple of positives for Plug Power. The company has some reputable organizations as clients, particularly in logistics, fast-moving consumer goods, and the aerospace sector: Amazon, Walmart, Carrefour, FedEx, Boeing, NASA, and now Airbus are on board. 

Revenue has almost doubled from $68 million in Q2 2020 to $124.5 million in Q2 2021 and Plug Power has $1.3 billion in cash to invest going forward. So there’s the good — but don’t go buying Plug Power until you’ve read the bad and the ugly. 

Bear Case

Where to start? While its revenue has doubled over the last year, $124 million is tiny for a company valued at over $18 billion. Plug Power represents a highly speculative investment as it likely won’t achieve revenue in line with its valuation for many years. 

In addition, we also do not know when the company will reach profitability. Plug Power has developed partnerships with some big names with plans to onboard new large multinational customers. It will be key to their strategy to retain and grow this customer base but if any one were to go south, investor sentiment could swing to the downside very quickly.
Another red flag is the number of shares outstanding jumping from 316 million to 567 million in the last year as PLUG has taken advantage of the sharp rise in its share price  — a 32,200,000 offering at $65 per share raised $2 billion in February. It may have increased the available capital for the firm to reinvest, but shareholders’ holdings have been diluted significantly as a result.

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