Skyrocketing as much as 1,000% in 2020, Plug Power (PLUG 1.26%) seemed unstoppable a few years ago. Between the company's newly formed partnerships and management's auspicious five-year outlook, investors' enthusiasm for the fuel cell stock appeared to know no bounds.
But it seems that those bounds have, in fact, been discovered in the last couple of years. In 2022, shares of Plug Power plunged 56%, and in 2023, shares have fallen even more precipitously -- about 63%. Should investors who believed the bandwagon passed them by in 2020 now leap at the stock's lower price tag? Let's take a closer look to see if a position in Plug Power is a smart move to make for 2024.
What powered the bears' pessimism in 2023?
While Plug Power reported some positive news during the year, investors clearly emphasized the more concerning announcements. From a first-quarter 2023 earnings report that neglected to reaffirm management's profitability outlook to the more recent third-quarter financial results that missed analysts' top- and bottom-line expectations, Plug Power consistently failed to charge up the market's enthusiasm as it had done a few years ago.
Perhaps the most troubling development that emerged this year was management's lack of confidence that the company would continue to remain in good financial standing. In the company's Q3 2023 10-Q, management cast doubt upon the company's "ability to continue as a going concern." With management questioning whether the company can operate as a going concern, investors were clearly uninterested in owning a piece of a business that may not be able to pay its debts.
Why bulls are hopeful about 2024
Despite Plug Power stock's recent dismal performance, optimists believe the future is still bright. In the coming year, specifically, there's hope that the company's green hydrogen production activities will help to get the stock back on track. Expanding beyond its bread-and-butter business, fuel cells, Plug Power is committed to emerging as a leader in the hydrogen economy, targeting daily global green hydrogen production of more than 2,500 tons by 2030. Management expects to make steady progress toward this goal in the coming year.
In Georgia, green hydrogen is expected to achieve daily production of 15 tons before the end of 2023, and the company is simultaneously working to expand this capacity to daily production of 30 tons. Elsewhere, Plug Power anticipates commissioning of green hydrogen production facilities in 2024 located in several states: New York, Texas, and Louisiana.
And that's just stateside. Across the pond, Plug Power plans on commissioning a green hydrogen production facility in Spain in 2024, and it expects engineering activities to begin at a similar facility in Finland next year as well.
...and in the years beyond
Looking beyond 2024, bulls are enthusiastic about management's 2030 financial projections. For one, management expects to report 2030 revenue of approximately $20 billion. Should the company achieve this guidance, it will represent a staggering 52% compound annual growth rate from the $701 million that it reported in 2022. Additionally, management projects a 35% gross margin, representing a steep turnaround from the negative 28% and negative 34% gross margins that it reported in 2022 and 2021, respectively.
Don't plug this hydrogen stock into your portfolio anytime soon
Soaring revenue growth and a positive gross profit may be two things that sing sweetly in growth investors' ears. At this point, though, they seem more like siren songs than dulcet melodies. The fact that management raised the issue of the company's "ability to continue as a going concern" is a major red flag. It's hard to reconcile the company's 2030 projections with the fact that it may not be able to satisfy its financial obligations in the immediate future.
Until there's greater reassurance that the company is on firm financial footing, investors would be well advised to keep Plug Power at arm's length, choosing instead to consider any one of the other hydrogen stocks available right now -- stocks that offer comparable upside and far, far less risk.
