Ayush Singh
Growth, long-term horizon, momentum, tech
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Plug Power's Turnaround Is A Pipe Dream
Jul. 8, 2015 1:57 PM ET | 10 comments | About: Plug Power, Inc. (PLUG)
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Summary
Plug Power's business model is unsustainable as the company is burning cash at a very fast rate.
Despite expecting record revenue in Q2, Plug Power will likely report wider losses.
The company will (yet again) fail to meet its gross margin target.
Despite the negatives, Plug Power is trading at a hefty premium.
After hovering near 52-week lows for quite some time, Plug Power's (NASDAQ:PLUG) shares jumped as much as 17% yesterday when the company reaffirmed its revenue guidance for 2015. Plug Power expects to see a record for quarterly revenue in Q2. GenDrive shipments are expected to jump to 888 in Q2 from 419 in Q1 while the company remains on track to generate over $100 in sales in 2015. Plug Power's CEO Andy Marsh said:
"Management set aggressive revenue and operational goals for 2015, and the continued customer acceptance of our products along with the performance of our team has resulted in a record revenue quarter that is right in line with these goals. Plug Power continues to lead the industry with innovative and groundbreaking solutions that really help customers increase productivity and save money."
I don't think this justifies the massive jump, and I'm still skeptic about the company's future prospects. Without actual numbers, it's not possible to know how good the quarter actually was and as I have explained in my previous article, Plug Power has a history of failing to deliver on its promises. So, I will recommend investors to stay away from the stock till the company releases its official Q2 numbers.
Record revenue will lead to record losses
I'm not claiming that the company will fail to meet its revenue guidance, but I think investors should look at the company's EPS and gross profit margin to assess its progress. Growing sales is usually a good sign of a company's progress, however it is different in Plug Power's case. As you can see from the chart below, the company's gross profit margin is -6.86%.