With the world transitioning from fossil to cleaner fuels, there's strong growth potential for companies in green hydrogen and fuel cell technologies. Yet Plug Power (PLUG -6.95%), a first mover in the fuel cell industry, has taken its investors on a turbulent roller-coaster ride. The stock was unstoppable when it more than quintupled in a matter of three months and hit a high of $75.49 a share in January 2021. The euphoria died down just as quickly, with the fuel cell stock crashing to around $29 per share by the time the year ended.
Ever since, the market has waited for its quarterly earnings release and the guidance it provides for 2022 to help the stock regain its mojo. The company just released its numbers, and the market reacted positively and sent Plug Power shares popping today.
Although profitability is nowhere in sight yet, the company is growing its top line at a solid pace. In fact, it generated its highest-ever quarterly profit in the fourth quarter and ended 2021 with record revenue worth $502 million. And the company is confident of growing revenue exponentially henceforth.
Strong top-line growth is a typical characteristic of growth stocks, and such stocks can eventually make patient investors a lot of money.
So does that mean now's an opportune time to buy Plug Power stock? After all, the company expects to grow its revenue by 80% in 2022 and almost sixfold to $3 billion by 2025.
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That's huge, but a company with such strong sales growth is also expected to earn a profit and generate positive cash flows. That may not come easy to Plug Power.
In 2021, it suffered a net loss of nearly $460 million despite a dramatic jump in revenue. At best, Plug Power expects to generate an operating margin of 17% by 2025. To achieve its goal, it is investing in technology to cut its services costs (the company doesn't just sell fuel cell products but also services them) and expects to cut services cost per unit by 45% by 2023.
At the same time, Plug Power is also expanding its footprint by tapping industries outside material handling equipment for its fuel cell products and making headway into green hydrogen. In fact, it wants to cover the entire value chain in green hydrogen as it aspires to be the leader. The company is even building the world's largest fuel cell and electrolyzer manufacturing gigafactory in Rochester, New York, with production expected to start in the fourth quarter. Electrolyzers are devices used to produce hydrogen.
I believe green hydrogen holds the key to Plug Power's margin growth and could eventually help it break even. Importantly, the company has the money to invest in hydrogen -- it ended 2021 with cash and cash equivalents worth nearly $2.5 billion. Given the backdrop and its sales growth potential, it could pay to keep an eye on Plug Power stock.
