Hydrogen fuel cell developer Plug Power (NASDAQ: PLUG) is an interesting company when it comes to fundamentals. In the past year, the PLUG stock price has declined 62.95%. In its history of over two decades, the company has so far made no profits. However, this has not stopped the PLUG stock from returning a whopping 1872% on investment over the past 5 years, making it a seemingly attractive long-term investment.
As a renewable energy company, the company is doing quite well. With key clean energy partnership deals in its kitty, the company is enjoying growing clout in the hydrogen fuel sector. Moreover, consistently strong top-line performances are also impressive.
On January 11, Citigroup analyst P.J. Juvekar reiterated a Buy rating but trimmed his price target on Plug Power to $37 from $56, saying that investors need to be on check now after a solid 2021 rally in the chemical sector.
But the immediate reaction of investors to this price target cut was not as you thought it would be. The Plug Power stock price ended 1.4% higher than its previous session close, before again falling back to January 10 levels yesterday.
This indecisiveness among investors is a result of a mixed stance. Juvekar believes that higher inflation and increasing interest rates lead to stronger business and price performance of chemical companies. So that means that on one hand, the recent talks of higher interest rates are actually going to be beneficial for Plug Power; and on the other hand, tighter policies to curb inflation are bad news for the company, as per Juvekar’s reasoning.
Additionally, the analyst said that the company is looking at the possibility of easing chip shortages causing the stock to rally this year, along with the revival of housing, electronics, and automotive industries, which can give rise to new uses for fuel cells. This is another encouraging point to note for investors.
Importantly, management earlier mentioned Plug Power’s target of generating a gross margin of more than 30% by 2024. As good as it may sound, this target seems ambitious, given the previous incidents where the company has failed to meet its own expectations.
Again, widening losses are making us wary of the company’s ability to become profitable in the near future. Looking at the upcoming PLUG earnings for the fourth quarter of fiscal 2021 on March 10, the company expects to report a net loss of $0.11 per share, indicating about a 140% year-over-year decline.
The exceptionally high trailing twelve-month price-to-sales ratio of 551.76 also makes us think twice about adding the stock to our portfolio.
Nonetheless, Wall Street consensus is positive about the company’s prospects, giving the stock a Strong Buy rating, based on 14 Buys and 4 Holds. The Plug Power stock prediction shows an average price of $46.48.
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