Plug Power stock (NASDAQ:PLUG) is in a difficult spot. The company obviously has a viable business and product. It has a list of top-name partners either using its products and services or helping it build out a vertical supply chain.
On the other hand, Plug Power stock can’t make money. It is selling its fuel cells at a significant loss resulting in negative cash flows as it burns through the cash it has on hand. It’s why it was forced to include a going concern notice last year, though it subsequently removed the wording from its annual report.
Investors have been the losers. Plug Power stock is down 30% in 2024, off 67% over the past year and the hydrogen fuel cell leader has lost over 95% of its value from the all-time high hit in 2021. During that time shareholders have suffered through significant dilution as Plug issued ever more shares. Between 2018 and 2023, PLUG stock’s share count grew from 218 million to over 595 million.
It’s past time investors looked dispassionately at their company. Plug Power is not in a good spot and despite its cheap valuation, the stock is not a buy.
Profits are always just over the next hill
Plug Power generated nearly $1 billion in revenue in 2023, a record for the company, and 27% higher than the year-ago figure. But net losses nearly doubled to $2.50 per share, though they were caused in part by investing in growth and expansion projects. CEO Andy Marsh says 2024 will be the year Plug Power gets its financial house in order.
“Recognizing the past challenges with cash management, we are dedicated in 2024 to bolstering our financial profile. Our commitment to driving forward the hydrogen economy remains unwavering.”
That’s fine, but investors have heard that refrain before. Last year Marsh was confident 2023 was the year it would achieve break-even margins. He also forecast generating $2 billion in sales on its way to $20 billion in revenue(!) by 2030. Shareholders have likely learned to discount the grandiose claims management makes at this point.
Yet this is a real business
As noted at the start, Plug Power stock is not some vaporware business. Its fuel cells work in the warehouses of Home Depot (NYSE:HD), Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN). Walmart, in fact, accounts for over 23% of Plug’s revenue. That includes a warrant charge of $5.9 million resulting from a 2017 agreement between Plug, the retailer, and Amazon to purchase some 55.3 million shares of company stock over a period of years.
The warrants are recorded as a reduction in revenue so the contribution amount is actually higher. At the end of last year, almost 35 million of Walmart’s warrant shares had vested. All of Amazon’s 55 million warrant shares have vested. Plug’s second-largest customer accounts for almost 11% of total revenue.
So it’s not as though Plug’s customers aren’t invested in its success. It’s just that Plug Power can’t seem to turn into a profitable business.
Wait for PLUG stock to make good
Whether or not Plug Power is pinky-swear level ready to make 2024 its year to turn around, investors shouldn’t hold their breath. They’ve been promised this for so long they ought to be numb to management’s entreaties at this point.
As hard as it may be to let go, 2024 should be the year shareholders sell their stock and wait for Plug Power to make good on its promises. Only then should investors be willing to put their money into play again. Until then, Plug Power stock can only be considered a sell.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.