If one were to summarize Plug Power's (PLUG 6.51%) entire third-quarter 2023 earnings report in just 20 or so words, it might read something like this: "We continue to incur losses and might never achieve or maintain profitability; our ability to continue as a going concern" is in question.
At least, that's how Plug put it in its "cautionary note on forward-looking statements" earlier this month. Plug tacked this note onto the end of the Q3 release, in which Plug admitted that it lost $0.47 per share on sales of $198.7 million, grew its sales only 5% year over year -- and suffered a loss 57% bigger than what investors expected.
This was not how the quarter was supposed to go.
NASDAQ: PLUG
Key Data Points
What should have happened
Recall that Plug Power had previously told investors it would book $1.4 billion in sales this year, and earn only its fifth gross profit (but probably not an operating profit) in its 26-year history (according to data from S&P Global Market Intelligence). With three quarters of the year now over, though, and Plug less than halfway to its revenue goal -- and with an average gross profit margin of negative 35% -- it doesn't look like Plug is going to make any kind of profit at all this year.
The bigger question for investors is: Will this company ever earn a profit?
Promises ... broken
Consider: Making projections based on the financial guidance provided by Plug Power, stock market analysts have predicted the hydrogen fuel cell pioneer was about to become profitable multiple times. Usually, those predictions were for profits to arrive just a few years in the future.
In 2021, for example, analysts polled by S&P expected Plug would earn its first profit in 2024.
As recently as January this year, the average forecast was that Plug could earn a profit in 2025.
But according to the latest prognostications proffered by Wall Street analysts after Plug's Q3 report, the prediction now is that Plug Power won't earn a profit before 2026. (On average, analysts are predicting that profit will be $0.07 per share, by the way, in case you were wondering -- valuing Plug stock at a hefty 57 times the earnings that it may or may not book three years from now).
2026: The year Plug turns profitable?
This latest projection should ring a bell for investors who have been following the company. After all, 2026 is the year that Plug Power has publicly proclaimed it will generate $5 billion in sales and earn a 17% operating profit margin on those sales.
Multiply $5 billion by 17%, apply a 21% federal corporate income tax rate, and Plug seems to be saying it will earn $178.5 million that year -- $0.29 per share -- in 2026. (And probably more. Plug will have a lot of tax-loss carry-forwards that it could use to increase its profits, once it turns profitable).
But most Wall Street analysts doubt Plug can even earn $0.29.
And one analyst is even more pessimistic.
Last week, Manav Gupta of Swiss investment bank UBS came out with a prediction that not only will Plug miss this year's sales and earnings estimates by a mile, but even in the supposed inflection year of 2026, Plug may be lucky to report just $3.1 billion in sales. If Gupta is right, Plug's revenues will be 38% below its own projection. Best case, that probably means Plug earns only $0.17 per share (62% of $0.29) in 2026. Worse case, $3.1 billion in sales might not cover Plug's fixed costs such that it earns any profit at all.
And then there's the worst case, highlighted by Plug's own "going concern" warning: Plug might not survive to see 2026 at all.
How worried should Plug investors be?
Is this a prediction that Plug will go bankrupt before 2026?
Actually, no. UBS doesn't predict that -- and neither do I.
Recall that Plug Power has been in business for more than a quarter of a century without ever earning a profit. Over this span, Plug Power stock has often traded well below where it trades today. Indeed, Plug spent a solid decade (from 2011 basically up until 2020) below $4 a share, yet it never went out of business.
Even if Plug doesn't earn a profit in 2026 -- even if the company never earns a profit -- I think it's entirely possible Plug can muddle along, living off the "kindness of strangers," issuing new shares as needed to raise new cash to keep itself in business. Plug could very well survive indefinitely.
It might never earn a profit, though. And if that's the case, even Plug's survival won't be great news for investors, so ... caveat investor.
