Shares of Plug Power (PLUG 5.76%) rallied after the company announced a new restructuring plan in conjunction with its fourth-quarter earnings report released on Monday, March 3. Nonetheless, the stock has still struggled, down about 16% year to date and more than 55% over the past year as of this writing.
At this point, there are still questions about whether the company will survive or face going bankrupt. Let's take a closer look at its recent earnings and restructuring plan to see if the company has the potential to bounce back.
An unsustainable business model
Plug Power is working to become an end-to-end hydrogen solutions company. That said, its primary product is a fuel cell that is used in forklifts and other material-handling equipment. Fuel cell-powered forklifts are typically used in high-volume warehouses and distribution centers that run three shifts. As such, the company counts large retailers Amazon, Home Depot, and Walmart among its customers.
While Plug Power has carved out a nice business in this area, the company has long dealt with the issue of selling the hydrogen fuel for these fuel cell-powered forklifts at huge losses. This has led to the company reporting a negative gross margin and burning through a lot of cash.
NASDAQ: PLUG
Key Data Points
In response, the company has embarked on building out a network of hydrogen plants to make the hydrogen fuel itself and sell it at a profit. It currently has three plants online in Georgia, Tennessee, and Louisiana with a combined 40-ton-per-day capacity potential. It expects to reach 39 tons per day capacity by the end of March following an expansion at its Louisiana plant. However, customer demand is sitting at approximately 55 tons per day.
The company has a large 45-ton-per-day capacity plant set to be built in Texas. It has already spent $250 million on the Texas plant, with another $600 million required to complete it. It expects the plant to be online 18 months to 24 months after it begins construction late this year. It will retain 70% to 80% ownership stake in the plant. In January, the company closed a $1.66 billion loan guarantee from the U.S. Department of Energy under the prior presidential administration to help finance up to six projects.
Turning to its Q4 results, Plug Power reported revenue of $191.5 million, down 14% from $222 million a year ago. It said revenue was impacted by $120 million due to a customer warrant charge and other delays. On the bright side, sales of its electrolyzer systems soared 583% in the quarter, as it recognized the revenue from a 5-megawatt (MW) system sale. It had a negative gross margin of 122% as it took several noncash charges in the quarter.
The company had operating cash flow outflows of $131.2 million for the quarter and $728.6 million for the year. Its free cash flow was a negative $165.2 million for the quarter and a negative $1 billion for the year. It had $200 million in liquidity at year-end.
Plug Power forecasted Q1 2025 revenue to be between $125 million and $140 million, which would be up from $120.3 million in revenue a year ago, helped by the push-out of some Q4 revenue into Q1. Meanwhile, it is looking for continued gross margin improvement and reduced cash burn throughout the year. In a February presentation, it forecasted 2025 revenue of between $850 million and $950 million with gross margin of negative 5% to negative 20%, but it did not give full-year guidance with its Q4 report.
Meanwhile, the company is looking to achieve $150 million to $200 million a year in cost savings through its Project Quantum Leap restructuring plan. The cost savings will come from layoffs, facility consolidation, and product focus refinement. The goal is to help the company achieve profitability. It will focus on material handling, hydrogen production to support material handling, and electrolyzer sales.
Image source: Getty Images.
Is Plug Power a buy?
At its current cash burn rate, Plug Power will run out of money in Q2 unless it issues more equity or some entity is willing to lend it more money. Given its low stock price which has been cut in half over the past year, that just leads to more dilution.
It also appears the gross margin will remain negative in 2025 and with the Texas plant likely not coming online until late 2027 or early 2028, it likely will continue to burn cash over the next three years. At the same time, tax credits will play a role in the unit economics of these hydrogen plants, and those seem more likely to get cut under this administration than see a benefit.
As such, Plug Power remains very speculative stock that faces the possibility of going bankrupt in the next few years. Companies can come back from the brink of bankruptcy and perform well, but I'd stay away.
