What: Shares of fuel cell system provider Plug Power Inc (PLUG 4.02%) fell 17% in early trading Monday after it reported third-quarter earnings.
So what: Revenue rose 58% from a year ago to $31.4 million as service revenue nearly doubled to $13.4 million. Net loss also grew from $9.4 million a year ago to $10.2 million, although the loss adjusted for one-time items rose 53% to $11.4 million, or $0.06 per share.
The first issue today is that results missed Wall Street's estimate of $30.7 million in revenue and a $0.05 per-share loss. Plug Power may also miss its revenue goal of $100 million for the year and gross margin goal of 25% for the fourth quarter, which has investors worried that financial progress is slower than expected.
Now what: A company like Plug Power reporting persistent losses needs to exceed growth estimates, and right now that's not taking place. Right now, I think the concerning figures are an 18% gross margin for product sales and a negative 26.3% gross margin for service revenue. Those figures don't show much sign of pending profitability, and that's what investors want to see.
With losses piling up, I don't see much reason to buy Plug Power shares after the drop today. The company has a lot of potential in the hydrogen business, but until it can make money, I'll remain skeptical of its prospects as an investment.
