Should You Unplug From Plug Power?

Shares of Plug Power (NASDAQ: PLUG  ) have been on fire, more than doubling in the two days.  In a press release and conference call, management guided for 2014 profitability -- again.  While such forecasts are generally a positive for any speculative company, a closer look at past statements from Plug Power should give Foolish investors at least some pause.

Blowout quarter
On Dec. 4, Plug Power  stated that it received $17.8 million in bookings since Oct. 8, and it expects $30 million to $40 million more in orders by the end of the quarter.

For a company that only did $4.6 million in sales last quarter, that's a significant jump. Plug Power went on to say that it expects profitability in 2014, and as it books more orders in December, it is on track for a "blowout quarter."

Old news?
While this information certainly is positive, most of it was already known and public. In Plug Power's third-quarter release on Nov. 14, the company stated that it had $14 million in bookings since Oct. 8.

Do a little algebra, and you'll notice that out of the $17.8 million in bookings from the more recent release, only $3.8 million of that figure was new. It's not bad, but it's a relatively small increase compared to the prior figure of $14 million.

As for the increase in new orders expected mentioned in the Dec. 4 release, management already told the market to expect that back with earnings in November when it said it was expecting several "large customers seeking sales agreements" to close in the fourth quarter. CEO Andy Marsh even forecasted profitability then too and used the exact same words: "a blowout quarter."

Foreshadow of a rally
It may seem a bit strange for Plug Power to seem so excited over repeating forecasts about deals still not yet closed, but a peek at what Marsh said in the third-quarter conference call may reveal why:

I'd like now to move the conversations to address our current status with the NASDAQ. We're still in discussions with NASDAQ concerning our listing pricing deficiency. We have conveyed our potential remedies to rectify this situation. Our focus remains on increasing the stock price to resolve this issue organically.

Mission accomplished?

What about the past?
When judging the strength of management forecasts, it's always a good idea to weigh in on the past.  Marsh doesn't exactly come off as the next Nostradamus.

For example, way back in March of 2009, Marsh said, "We will continue to grow our business and forge a path to profitability in 2009." Four years later, investors are still waiting.

More recently in August of 2012, Marsh stated, "With the continued improvement in reducing our product costs, profitability is within reach." He explained that in order to get profitable, material costs had to come down to under 70%, and Plug Power was targeting 60% in 2013.

Fast-forward to Q1 and Q2 of 2013. Marsh stated both times that the "worst case" for material costs is 67%. In Q3 2013, it was still over 70% and is "targeting 67% material cost." What went from a forecast of 60% became a worst case of 67% -- and now the company's just hoping to achieve what was supposed to be the worst case.

Compare to FuelCell Energy
Though it's not a perfect comparison, FuelCell Energy (NASDAQ: FCEL  ) is another fuel cell company. It operates on a much bigger scale and with a different technology, but it attracts the same type of investing crowd.

FuelCell Energy has been growing like a weed. Sales last quarter were up 81%. Plug Power "expects" backlog, but FuelCell Energy already has it, with orders in the hundreds of millions, compared to sales of just $53.7 million last quarter.

Like Plug Power, FuelCell has been beating the profitability-is-coming drum for the last two quarters -- though FuelCell's forecasts are based more on results than predictions. And with FuelCell Energy trading at a market cap not too far beyond Plug Power's, it appears that Plug Power's shares may have gotten a bit ahead of themselves.

Foolish final thoughts
It seems like Plug Power's management has a history of overpromising and underdelivering. Since management can't seem to get its own forecasts right, how can Foolish investors figure it all out and invest accordingly?

Plug Power may very well do everything it plans and more in 2014. However, with the stock more than doubling in two days, and given management's overly optimistic history, Fools may want to wait on the sidelines for more solid results.


Read/Post Comments (8) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 06, 2013, at 6:50 PM, byecell wrote:

    Why does it matter that the stock has doubled? Investors are making decisions based on where they believe the future price will be based on the news. Customers have been evaluating the product and now it sounds like they are making full comittments to transition their fleets. Add in they only have 4,500 out of 250,000 units for "existing customers only" and the growth potential is huge. Add in they are entering the truck refrigeration biz and you have more growth. Those who already own the stock continue to see the potential. Those that don't "wish they did". All CEO's try to grow the company and improve the stock price organically.. isn't that their job. LOL

  • Report this Comment On December 06, 2013, at 8:00 PM, cmkus2001 wrote:

    I am sick of Motley fool articles and they never correct. SEC should ban them

  • Report this Comment On December 06, 2013, at 9:20 PM, digitalborealis wrote:

    This site and reviews are garbage... Unsubscribing from their fool articles.

  • Report this Comment On December 06, 2013, at 10:32 PM, ICanFool wrote:

    Motley Fool is wrong about Plug with their negative views. They will eat crow soon ..

    If you guys understand Mechanical Engineering and technology associated with manufacturing operations, safety and total cost for a business, PLUG power provides more value for their customers. The ROI is significant enough for manufacturing operations, this will be better than Amazon.... just sit back, relax and drool.

    Why do you think, Toyota and Honda are producing automobiles with Hydrogen powered fuel cell engines. Think about it. PLUG Power has picked its niche market after doing the homework.

  • Report this Comment On December 07, 2013, at 10:37 AM, dbtunes18 wrote:

    Maybe someone should ask Teal V. who she spoke to on Friday, and who she received a proposal from on Friday, and who told her that he would break the 52 week high that she couldn't, on Monday for fun, only to have his contract tossed out, because the stock caught fire as a result of his efforts. Ask her why, even though she knew who was responsible for the new high on Monday, and Tuesday, she decided on WEDNESDAY to toss that contract out, to save herself some embarrassment because he did in two days what she, the director of marketing and investor relations, couldn't do in over a year.

  • Report this Comment On December 07, 2013, at 1:28 PM, Rockman wrote:

    THESE GUYS AREN'T FOOLS, THEY'RE IDIOTS. This stock is now on the move. People are cautious with their money today. It took confirmation before people were ready to act on such a low trading stock. ICanFool is right, they will eat Crow. I say $25.00 a share by late next year if not earlier. The fools are too focused on selling their Newsletter. They've, long ago, lost perspective ...and my respect.

  • Report this Comment On December 07, 2013, at 1:54 PM, dbtunes18 wrote:

    $25 a share is LUDICROUS, maybe do your homework. Fundamentally, if they realize ALL of the revenue they say they will BOOK in 2014, the stock is fundamentally worth $6.00. It's worth $3.00-$3.50 now, which is where it will go, and stall, until they actually prove out the fundamentals.

  • Report this Comment On December 08, 2013, at 2:33 AM, whoppdedo wrote:

    Whatever. I bought at ..71 and sold at 1.97. I made a sweet chunk of change. Tell me who is the fool now.

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