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Why Plug Power Stock Sank Today

By Neha Chamaria – Updated Oct 14, 2021 at 11:53AM

Key Points

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The company announced sales guidance for 2022 and 2025 at its annual analyst day.

What happened

After a stunning rally in the past week or so, shares of Plug Power (PLUG 0.73%) dropped Thursday as the company kicked off its much-awaited annual event, called the Plug Symposium, and provided important updates. Shares of the hydrogen fuel-cell company were trading down 6.5% as of 11 a.m. EDT today.

So what

Before revealing its long-term financial goals, Plug Power announced a deal the first thing Thursday morning: It will acquire Applied Cryo Technologies, a company that manufactures cryogenic trailers and storage equipment that Plug Power can use to store and deliver green hydrogen. Plug Power also announced a partnership to build an electrolyzer factory in Australia.

Just the previous day, Plug Power sealed a deal with Phillips 66 to explore opportunities to deploy its green hydrogen technology at the oil and gas giant's facilities. Plug Power also struck a partnership with Airbus on Oct. 13 to research and deploy green hydrogen infrastructure in the aviation industry.

This morning, though, it appears Plug Power's financial goals fell short of the market's lofty expectations that were fueled by multiple analyst upgrades on the stock in the past few days, which had sent the stock surging.

A confused person looking at his phone with computer screens displaying stock price charts in the background.

Image source: Getty Images.

Truth is, there's nothing to dislike in those numbers. Here are the two most important forecasts from the Plug Symposium:

  • $825 million to $850 million in sales for 2022.
  • $3 billion in annual sales by 2025.

First, its latest 2022 guidance is substantially higher than its previous 2022 sales projection of $750 million and could translate into astounding growth of 65% in sales over 2021.

Second, Plug Power's 2025 guidance again indicates management is even more upbeat about its top-line potential, given that it guided for only $1.2 billion in sales for 2024 at its last symposium.

Now what

It's important to understand that by sales, Plug Power is referring to gross billings, or the invoice value of equipment it deploys and services it renders. That might explain why the company generated negative revenue in 2020 after the value of warrants it issued to a key customer exceeded the value of services it rendered thanks to a meteoric rise in Plug Power's share price.

Since Plug Power's revenue should ideally now be close to its gross billings numbers, revenue worth around $3 billion by 2025 sounds promising. Investors in the growth stock, though, will now want to see the company convert that revenue into profits. With management not providing any hint about it yet, the market perhaps suddenly feels the stock might have run up too much too fast in recent days and could be a risky bet. 

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Plug Power Stock Quote
Plug Power
PLUG
$13.78 (0.73%) $0.10
Phillips 66 Stock Quote
Phillips 66
PSX
$100.90 (-2.05%) $-2.11
Airbus SE Stock Quote
Airbus SE
EADSY
$29.04 (2.36%) $0.67

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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