It's easy to think of hydrogen fuel cell technology as a "start-up" industry, but fuel cell specialist Plug Power (PLUG -2.85%) has been around for more than 20 years! And, honestly, its early investors don't have much to show for their enthusiasm.
But there are signs that Plug may have an opportunity to shake off the doldrums that have plagued it and hydrogen fuel cell stocks in general. Here are the three places Plug and its investors may find themselves in 2024.
Fuel cell technology, a clean -- or, in some cases, mostly clean -- technology, is a means of generating combustion-free electrical power. Its big rival is, of course, the rechargeable electric battery. While both were originally touted as green power sources for passenger vehicles, in recent years batteries have been handily winning that battle.
Just look at the numbers: Information Trends estimates there were about 6,500 fuel-cell vehicles on the road across the globe in 2017. But according to the International Energy Agency, that year there were about 3.1 million electric vehicles on the road worldwide. And that was before Tesla ramped up production of its popular Model 3.
Fuel cells have been relegated mostly to powering material-handling vehicles (read: forklifts) and some airport vehicles. While Plug -- and others -- are making small forays into other markets, like delivery vans, there hasn't been widespread adoption. And Plug really needs to grow, because its finances aren't in great shape.
Plug has never posted an annual profit, despite consistently growing its revenue. In the fourth quarter of 2018, it managed to squeak out positive adjusted EBITDA for the first time ever, which encouraged investors who hoped consistent profitability might be around the corner. But the first quarter of 2019 disappointed, with not only lower year-over-year billings but a bigger year-over-year adjusted EBITDA loss and higher inventories. Shares, naturally, slid on the announcement.
If Plug can't manage to turn a profit and if widespread (or even just wider-spread) adoption of fuel cell technology remains elusive, there's a very real possibility that the company might simply pull the plug (sorry: couldn't resist) and go out of business.
However, there are some signs that may not happen.
On top of the world
Plug has a history of providing rosy financial projections to investors and not following through -- which is why CEO Andy Marsh's claims that Plug would turn a profit in 2019 were met with some skepticism by investors. Marsh had also been teasing that Plug would be announcing some new global partners, and on the Q1 2019 earnings call, confidently announced he had "four [partnership announcements] in my pocket."
It seems as though these predictions may be coming to fruition. On May 28, Plug announced it was partnering with electric-vehicle manufacturer StreetScooter to provide 100 hydrogen fuel cell-powered delivery trucks to logistics and delivery heavyweight Deutsche Post DHL. Delivery of the trucks is set to begin in 2020.
Then, on June 11, Plug announced its acquisition of Canadian fuel cell specialist EnergyOr, which added ultralightweight fuel cells to Plug's portfolio. EnergyOr had been developing these systems for use in robotics and aerospace applications, which represents an expansion of Plug's current portfolio. However, shares have tumbled since that announcement, possibly reflecting investors' expectations of something bigger.
While still fairly small in scale, these new developments show that Plug still has opportunities to expand beyond its core material-handling market. Hydrogen bulls would say that this illustrates the massive opportunity for hydrogen tech in general and Plug Power in particular. If Plug can score more wins like these, it could finally shake off its financial doldrums and perhaps scale up to launch a serious challenge to batteries. In five years, Plug could be doing very well.
More of the same
Hydrogen bears would caution that 100 delivery vehicles is a good start, but isn't going to sustain the company for long. They might add that hydrogen's promise is nothing new, and that Plug has failed to capitalize on that promise for years.
Indeed, hydrogen has some advantages over batteries. For example, the speed with which a hydrogen fuel cell can be recharged -- in just a few minutes -- makes the technology a good choice for industries in which a vehicle can't be offline charging for several hours at a time. On its website, Plug touts that its fuel cells are less subject to degradation, take up less room, and cost less to operate.
But battery-powered vehicles are making big splashes -- see Tesla's Model 3 and proposed Model Y and battery-powered pickup truck -- while fuel cells...aren't. Perhaps one of the big announcements Plug has been teasing is going to be revolutionary, but what seems more likely is that we'll see more of the same from Plug: some small incremental improvements, maybe even consistent -- albeit low -- profitability, and fuel cells still stuck as a mostly niche product.
That doesn't really seem like a winning proposition for investors.
Where to go from here
It's unclear where Plug will be in five years...and that's actually not good for the hydrogen fuel cell manufacturer. While it seems to have several potential paths to growth, none of them seem to be sure things, and none of them look like proven winners. Plug could pull a game-changer out of its pocket, but as with many things about new technology, there's no guarantee.
Unless you have an exceptionally high tolerance for risk or are a true believer in hydrogen fuel cells, you'll probably want to stay on the sidelines.