Clean energy is the topic that will be unlikely to come out of fashion any time soon. One such company operating in this fashionable industry is Plug Power (NASDAQ:PLUG). The company gained momentum earlier this year after announcing positive Q1 results.
Impressive growth of 24% year on year and 68% increase vs Q1 2020 does raise some eyebrows. The company is extremely bullish about its future plans and is planning to achieve $1.2 billion in revenue by 2024. In six months ending June 30, the company’s net revenue stood at $108,883 million. Plug Power is confident about its ability to deliver the expected numbers in Q3, therefore it reaffirmed full year guidance and tagged Q3 2020 with $110-115 million for gross revenue.
To support its aggressive growth plans, the company increasing its sales and administrative spending by almost 50% in the first six month, compared to the same period in 2019. Plug Power continues its planned expansion in Europe, which is one of its core markets for material handling. The company is utilizing horizontal integration and is working with its local partners on green hydrogen generation.
Q2 2020 marked the first time the company issued convertible green bond in the US. The bond is specifically designed to support climate and environment projects. Despite challenging operational environment due to COVID-19, the company pinpointed multiple locations to build fuel cell and electrolyzer Gigafactory.
One of the key events for the company were its acquisition of Pennsylvania based United Hydrogen and European electrolyzer manufacturer -Giner ELX. The company expects operational synergies and lower manufacturing costs can be achieved combining technologies from both companies.
The company’s fillings and presentations sound impressive but the investors should not be blinded by them. Revenue expectations would require Plug Power to nearly triple its current revenues. The company has some patchy history on delivering on its promises and planning to place bets in places (China),where doing business can get more difficult with any political wind between the U.S. and China.
The company is relying on Low Carbon Fuel Standard (LCFS) in California and government provided initiatives in Europe. While such schemes tend to be more stable in the U.S. and Europe compared to some Asian markets, they do not come risk free. The global, COVID-19 caused recession can bring completely different sentiment into the politic atmosphere that could result in deprioritization of cleaner energy plans.
Plug Power is a young an ambitious company. Its horizontal expansion plans are grand. However, despite its upbeat mood, it is difficult to se how it will be able to achieve the necessary scale and profitability over the next -5 years. $200 million green bond will mature in 2025, which is just a year later after its goal of $1.2 billion revenue plans. R&D expenditure is approximately 20% higher in 2020 compared to the same period in 2019, however it does not look as aggressive as its sales targets, especially considering its willingness to introduce products and solutions to adjacent markets.
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