If you're betting big on Plug Power (PLUG +0.45%) or Lucid Group (LCID 6.83%), you should probably think again. These are the type of stocks that could easily wipe away a $100,000 nest egg in the blink of an eye. Both companies have the strong potential to go bankrupt in the coming years, with the stocks going to zero.
Let's take a close look at both stocks.
1. Plug Power
NASDAQ: PLUG
Key Data Points
Plug Power fancies itself as the next next-generation hydrogen fuel cell company, but its core business is actually providing fuel cells that go into forklifts and other material handling equipment. Fuel cell-powered forklifts are popular in high-volume warehouses and fulfillment centers that run 24/7, as operators just have to refuel the fuel cell and not recharge a battery. Meanwhile, the industry has moved away from gasoline-powered forklifts due to safety issues using them in an enclosed building.
This would seem to be a good business, but it has not been for Plug Power. The company also provides the hydrogen fuel to its customers, which it has long sold at a loss. To make matters worse, it has also been selling its equipment and infrastructure at a loss as well.
To try and change what is an uneconomical business model, Plug Power is in the process of building out a system of hydrogen plants to produce its own hydrogen to be able to sell at a profit. It's also undergoing a restructuring program and has looked to raise prices. However, thus far, the company is still producing negative gross margins and has both massive negative operating cash flow and free cash flow.
While the company has pledged to get to break-even gross margins by next year, that would still not solve all its problems. Meanwhile, the company has a long history of not delivering on its projections.
Image source: Motley Fool.
2. Lucid Group
NASDAQ: LCID
Key Data Points
Lucid's stock recently hit an all-time low, but that doesn't mean it doesn't have further to fall. Like Plug Power, the electric vehicle (EV) maker has negative gross margins and is bleeding cash. Just last quarter, it burnt through more than $950 million in cash, and it's gone through more than $2.5 billion in cash so far this year. Notably, the company's market cap is only around $3.7 billion, so this is extreme.
Lucid is betting big on its entry into the luxury EV SUV market with its Gravity model, which it thinks will complement its luxury sedan, Lucid Air. It's also looking to launch a cheaper midsize platform. However, the company isn't seeing the gross margin step-change that rival Rivian has seen when it switched to a zonal architecture that significantly reduced costs.
At the same time, the company has also started to pivot to autonomous driving and robotaxis. Instead of looking to build a robotaxi fleet like Alphabet's Waymo and Tesla, it's looking to be a hardware and architecture provider, and has signed a deal with Uber and has a partnership with Nvidia. The reality, though, is that the company is far behind, and just has some prototypes doing supervised test loops in a couple of cities.
The only thing really keeping Lucid afloat at this point is its well-heeled investors. Uber recently made a $300 million investment in the company, but its biggest backer is the Saudi Arabia Public Investment Fund (PIF). The fund owns around 60% of Lucid and has effectively backstopped it from already going bankrupt.
However, at some point, PIF may decide to stop throwing money at the problem, especially as demand for EVs continues to wane. If that happens, the stock would be toast.
