Plug Power's Quarter Proved Why Investors Should Remain Apprehensive

If there was any doubt that Ballard Power Systems (NASDAQ: BLDP  ) was a better bet on the fuel cell market than Plug Power (NASDAQ: PLUG  ) , this quarter helped put that arguemnt to bed. Sure, both companies struggled to grow sales, but the one thing that Ballard has been able to do is something that continues to elude Plug Power: the ability to generate a gross profit on the sales of its product. This past quarter, Plug Power's gross margins slipped all the way to a negative 42%. 

This probably has investors in the company scratching their heads, and by the reaction on Wall Street, there aren't too many who were impressed with Plug Power's results, either. In the video below, find out more about whether this quarter was a hiccup before better times come and what investors should watch for in the coming months.

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Read/Post Comments (6) | Recommend This Article (6)

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  • Report this Comment On May 16, 2014, at 1:06 PM, p92661 wrote:

    Tyler,

    You sound very nervous. Read the Cowens article. They actual went and visited one of the factories . Maybe you should hit the road and see for yourself.

    Fuel cell tech growing at an unbelievable rate. My bet is that a GE type company will buyout PLUG within a year.

    Apprehensive? No, just optimistic.

  • Report this Comment On May 16, 2014, at 1:31 PM, joe316joe wrote:

    Tyler,

    How short are you on this stock?????

  • Report this Comment On May 16, 2014, at 2:26 PM, bnisko wrote:

    Tyler, Why do you write useless articles?

  • Report this Comment On May 16, 2014, at 2:32 PM, jaketen2001 wrote:

    I might guess that margins went down as they ramp up production of fulfill the larger orders. As they begin to ship them, the increased rate of manufacture this year should drop the margin (loss) below last year's number, possibly, finally, in to positive.

    But this is a fundamental issue for Plug moving forward. And Ballard, yes, is very different, with positive margins approaching 30%.

  • Report this Comment On May 17, 2014, at 12:26 AM, saveandmakemoney wrote:

    Mr. Tyler Crowe:

    Plug Power is a "Turnaround" story that is quickly-transitioning into a "Growth" story. Before, the technology was not ready for prime time acceptance by the market. Regardless of the difficult past and current negative margins, Plug Power has significantly improved their balance sheet with the recent share offering - bolstering their cash balance to a total of $174 Million. I do not think major institutions would have invested at $5.50 per share if there was not an "upside" growth potential with Plug Power.

    If I may, I would like to point out some "positives"...so that prospective investors can see both sides of the Plug Power story. During the past couple quarters, Plug Power has received "repeat orders" from Walmart, Kroger, Mercedes Benz, BMW and Central Grocers. And, during the recent Conference Call, the CEO raised Fiscal Year 2014 Revenue Guidance to $75 Million. Also, Plug Power guided that Total Revenues for Fiscal Year 2015 would expect to reach $130 Million. This is clearly a strong growth trend. Here's a few extra positives that have investors such as myself excited:

    * The current "negative" margins are expected to turn "positive" with Positive EBITDA (Cash Flow) in Q4-14 as factory-throughput increases significantly.

    * The Cowen Analyst has upgraded Plug Power from "market perform" to "market outperform" following a factory tour.

    * Plug Power Management increased Revenue Guidance for Fiscal Year 2014 to $75 Million.

    * Plug Power announces entrance into the new fuel cell segment, Ground Support Equipment (Airport Tuggers) with FedEx at the Memphis Airport. Of course, this new segment will provide a new revenue stream for Plug Power.

    * Joint Ventures in Europe (Hypulsion) and Asia (Hyundai HYSCO) - both to purse vertical-integration via the development of low-cost, high-power PEM Fuel Cell Stacks.

    * Plug Power may build a Regional Distribution Centers for Hydrogen to support the current customer base including Distribution Centers using GenDrive Fuel Cells (End-Users of Hydrogen) and also Retail Outlets (End-Users of Hydrogen).

    * Plug Power seeks to vertically-integrate by seeking a Joint Venture Partner to produce Hydrogen. As the largest buyer & seller of Hydrogen in the USA, Plug Power seeks to lower costs of Hydrogen, thereby expanding Gross Margin.

    * On the recent Conference Call, the CEO announced that Walmart has agreed to "add" 1 more Distribution Center during Q3-14 which will increase Plug Power's Revenues by an estimated $6 to $10 Million. It's rather beneficial to have a "Big Elephant" customer issue an "Open-Ended" Purchase Order! Walmart is clearly expanding its relationship with Plug Power by ramping up and adding an extra Distribution Center -- to save more money and increase productivity.

    * Also, on the Conference Call, the CEO of Plug Power announced that a "major order" is in the works and could possibly close in Q3-14. Just speculating, but I believe this is the Diageo Deal which is rumored to be even larger than the current Walmart Deal. The same source that leaked this deal was correct on predicting the Volkswagon Deal.

    * Plug Power has guided Fiscal Year 2015 Total Revenues to reach $130 Million.

    With an emerging technology, Plug Power is getting "repeat orders" and it looks like 2014 is the breakout growth year that everyone has been waiting on. As Revenues increase significantly, the Gross Margins are projected to turn "positive" in Q4-14.

    At this low price level, for investors that do their due diligence research, we believe Plug Power offers significant upside growth if they simply execute and deliver revenue growth and gross margin expansion.

  • Report this Comment On May 17, 2014, at 11:52 PM, Marka99 wrote:

    Saveandmakemoney is spot on. But there is even more to this story. I had the opportunity to see a presentation by Plug's *customer*. Kroger is so happy with the money they save from using Lkug's products, they are going to bring Plug's products into ALL of their distribution centers (I think they have 30 of them total). Kroger said two this year, the rest in 2015.

    Plug has only announced a few sites for this year with Kroger. It's not unreasonable to expect this kind of response from one or more of Plug's other customers, plug some currently unannounced ones.

    Let's face it, CEO Marsh is not only a turnaround king, but he's moved into the next phase - strategic acquisition and growth.

    My guess is that the author didn't listen to the Q1 conference call. Marsh's great vision came through loud and clear. Having improved the balance sheet, and cut costs, Plug is on a path to becoming a key part of the backbone of goods movement I this country and elsewhere.

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