Is Plug Power A Dead Connection?

Key Points

• Plug Power plunges on weak results but this could be an opportunity in the stock. 
• The outlook for 2023 and beyond was reaffirmed and includes positive gross margins. 
• Even the most bearish analysts think the stock is at least fairly valued at $13. 

Plug Power’s NASDAQ: PLUG Q4 and FY results have the shares moving sharply lower, but this is a knee-jerk reaction to headline news. The results were weaker than expected but should not have been a surprise given the early phase of the business. Start-ups across sectors, industries, and verticals often experience hiccups that lead to misses offset in later quarters by strength.

In the case of Plug Power, this hydrogen fuel play is still guiding 2023 revenue above the Marketbeat.com consensus figure which suggests the business is still progressing well. Given the ongoing shift to green power and many use cases for hydrogen and, more specifically, green hydrogen, Plug Power could become a significant player on the world stage (or be acquired by one). 

Plug Power Has Weaker Than Expected Quarter 

Weaker than expected is about the worst that can be said of Plug Power’s Q4 and full-year 2022 results. The company brought in $220.7 million for the quarter and $701.4 million for the year, up 36% and 40% respectively, and company records. The bad news is that analysts expected closer to $270 million in quarterly revenues, but this was a very high bar to beat. Other good news in the report is that the gross margin improved by 600 basis points YOy to -28%. The net loss was expected, but the analysts were again expecting better results, weighing on the price. 

The Q4 results will weigh on the price action for the foreseeable future, but investors should be cheered by the company updates. Execs reaffirmed the 2023 targets for revenue and margin, a positive gross margin of 10% no less, and the long-term targets. These targets are supported by projects in the US and Belgium that are expected to come online in the next few years. 

There are 3 facilities set to begin production of green hydrogen in 2023 and at least 2 more on track for 2024. The Belgium facility has already received inbound interest equivalent to 5X the plant's optimum output. The takeaway is that the company will soon begin accelerating revenue growth while slowing CAPEX, which will grow the top line and provide leverage to the bottom line. Among consumers are Amazon and Walmart, which both signed agreements to purchase hydrogen from Plug. 

The Analysts Will Help Plug Power Into A Bottom

Unless the analysts change their tune, they will help Plug Power bottom at the current levels. The stock is rated a Moderate Buy according to Marketbeat.com’s analyst tracking tools, and even the most bearish of them think it is fairly valued at $13. The consensus rating is about 100% above the current action and the high price target set by Evercore ISI last spring is another 85% above that. There is also institutional support; the institutions have been adding to the positions on balance since last year and own about 52% of the company. 

The chart is not impressive. The stock has been downtrending since early 2021, and the short interest is still high. Marketbeat has an official short-interest near 16%, while Fintel.io has an off-exchange short-interest of over 50%. When this situation changes, the stock will begin moving higher; until then, the best we can expect is volatility. There are signs of support at the current price level; if the market can sustain it, we may see a base begin to form and a rally may follow.