Plug Power (PLUG 2.49%) stock fell by double-digit percentages for the third straight month in October and lost 22.5% value in the month, according to data provided by S&P Global Market Intelligence. Plug Power projected exponential growth in its revenue in the coming years at its annual event, the Plug Symposium, held in October. But there's something else investors have been worried about.
Plug Power expects revenue to grow by 17x, but what about profits?
Plug Power gave out some big numbers at the Plug Symposium. The company expects to generate $1.2 billion in revenue this year, grow it to $6 billion by 2027, and hit a massive $20 billion in revenue by 2030. In other words, Plug Power expects to grow its revenue by a whopping 17 times in just about seven years.
If that's huge, Plug Power also expects to achieve a gross margin of more than 35% by 2030. For perspective, the hydrogen fuel cell maker reported a negative gross margin of 31% in the six months ended June 30.
NASDAQ: PLUG
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Despite Plug Power projecting such massive growth, why did the stock still fall? While such a high should be a surefire step toward profitability, investors are concerned about the company's ability to meet its ambitious goals, given how it hasn't turned a profit yet despite shipping its first fuel cell system as early as 1999.
Worse yet, Plug Power's top and bottom lines are headed in the opposite directions lately. In its second quarter, Plug Power's revenue surged 72% to a record high of $260 million, but its gross loss more than doubled to $78 million.
To make matters even worse, the current macroenvironment is anything but conducive for growth stocks like Plug Power. Higher interest rates have made it costlier for companies to raise capital to fund their growth plans, with some companies even scaling back their capital expenditures and dividend growth. This fear of the impact of higher interest rates on Plug Power's growth, in fact, has been one of the biggest factors behind the stock's recent sell-off.
Is Plug Power stock a buy now?
To be fair, Plug Power has some things going for it. The company is expanding its green hydrogen capacity aggressively and expects its costs to fall and gross margin to improve substantially as it starts producing green hydrogen internally and reduces dependence on external purchases.
That's perhaps the most important thing investors should keep an eye on in Plug Power's upcoming third-quarter earnings report on Nov. 9. Even the slightest improvement in its margins could be lapped up by the market as a potential sign of Plug Power's turnaround. However, savvy investors may want to wait to see whether the trend persists before buying the stock.
