The hydrogen fuel-cell maker Plug Power, Inc. (PLUG) closed yesterday’s trading session at $48.78, trading 35.4% below its 52-week high of $75.49, which it hit on January 26. The stock had soared with the installation of a new U.S.  Presidential administration in January; the Biden administration has ambitious plans regarding the reduction of global warming.

However, the stock has lost 24.1% over the past month; news of the company’s CEO Andrew Marsh selling company shares in January and reaping a $36 million profit from doing do dampened investors’ confidence.

PLUG’s disappointing financial results for the fourth quarter (ended December 31, 2020)  drove the stock down further.

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Here’s what we think could shape PLUG’s performance in the coming months:

Slow Adoption of Hydrogen Fuel Cells

With concerns over climate change growing worldwide,  governments are taking measures to shift to a renewable energy-driven sustainable future. Developing fuel cell electric vehicles (FCEVs), which are powered by hydrogen, is an important step toward that goal. However, the infrastructure required for this  is still underdeveloped , causing the slow adoption of hydrogen fuel cells.

Furthermore,  hydrogen’s sustainable future relies on the production of green hydrogen. But currently, roughly 96% of hydrogen is generated from fossil fuels. So, several developments are required before  FCEVs can match the feasibility of battery electric vehicles (BEVs). As a result, it might take significant time for PLUG to ride the clean-energy wave.

Expensive Valuations

In terms of forward enterprise value/sales, PLUG is currently trading at 93.63x, significantly higher than the industry average  1.95x. In terms of forward price/sales, the stock’s 100.63x ratio is also significantly higher than the industry average  1.57x. And its stock’s forward enterprise value/ebitda of 1002.85x is much higher than the industry average  12.77x.

Disappointing Recent Financials

PLUG y reported  revenue of negative $316.34 million for the fourth quarter, ended December 31, 2020,  compared to its net revenue of $91.66 million for the fourth quarter of 2019. PLUG also reported revenue of negative $246.04 million from the sales of fuel cell systems and related infrastructure. Its net loss came in at $476.17 million for the quarter and its loss per share came in at $1.12. Moreover, PLUG missed  consensus EPS estimates in three of the trailing four quarters.

Poor Profitability

In terms of its trailing-12-month gross profit margin, PLUG’s 5.3% is much lower than the industry average  28.9%. Also, the stock has a negative value for its trailing-12-month levered free cash flow margin compared to the industry average  8%. PLUG has negative values for ROE and ROA also.

POWR Ratings Reflect PLUG’s Bleak Outlook

PLUG has an overall rating of F, which equates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. PLUG has an F grade for Value, consistent with the stock’s significantly higher-than-industry valuation ratios.

The stock’s much lower-than-industry profitability values  led to a Quality Grade of F.

In addition to these ratings,  we have also given PLUG grades for Momentum, Stability, Sentiment and Growth. Get all of PLUG’s ratings here.

PLUG is ranked #89 of 90 stocks in the Industrial – Equipment industry.

Better than PLUG: Click here to access several other top-rated stocks in the same industry.

Bottom Line

PLUG witnessed a steep fall from its 52-week high of $75.49 because of the factors discussed here. The stock is currently trading at a stretched valuation and is overdue for a pullback. Consequently, we think it  wise to avoid the stock for now.

Click here to checkout our Electric Vehicle Industry Report for 2021

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PLUG shares were trading at $47.11 per share on Wednesday morning, down $1.67 (-3.42%). Year-to-date, PLUG has gained 38.93%, versus a 3.21% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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