Shares of Plug Power (PLUG 0.32%) continued their decline today, falling as much as 2.7% early in trading and falling 1.7% at 12:55 p.m. EDT. For context, shares are still up 12.8% this week after the company reported first-quarter 2021 financial results.
The initial reaction by the market on Tuesday was hugely positive on what appears to be a great first quarter. Revenue was up 76.3% to $72.0 million and Plug Power ended the quarter with a whopping $4.4 billion in cash after a $2 billion stock offering and $1.6 billion investment by SK Group.
Shares have settled lower as investors have digested more of the earnings report. The $60.7 million loss is notable, especially after the revenue growth and compared to the $37.4 million loss a year ago. But what investors should really keep an eye on is how Plug Power is losing money on ongoing contract and fuel sales. In the first quarter, services, power purchase agreements, and fuel deliveries all resulted in awful margins.
|Item||Q1 2021 Revenue||Q1 2021 Cost||Q1 2021 Gross Margin|
|Services||$6.0 million||$13.1 million||(116%)|
|Power purchase agreements||$7.8 million||$18.3 million||(134%)|
|Fuel delivered to customers||$11.1 million||$22.1 million||(99%)|
Plug Power isn't just losing money on most of its sales, it's charging less than half of what it needs to in order to make a gross profit. That's incredibly alarming and isn't a new phenomenon. Plug Power has lost money on each of these segments going back to at least 2018.
Revenue growth is great for Plug Power, which clearly wants to be a growth stock. But if the company can't make money on increasing sales it will never be a financially sustainable business. What is worrying is that management has been promising better margins for years, only to report margins that seem to be getting worse. And the market could be coming to grips with that, wearing off some of the shine from the earnings report on Tuesday.