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Plug Power.
Nasdaq PLUG 2,56 US$ -43,11%
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Don't Be Fooled by Plug Power Again

Publié le 30 janvier 2016

Plug Power (PLUG) has a history of making many promises and failing to deliver. Over the years, Plug Power's CEO, Andy Marsh, has failed to meet his own guidance multiple times, which is the primary reason why the stock has plunged considerably over the last few years.

But Plug Power has finally managed to deliver on its promises as the company is on track to report $100 million in annual revenue in 2015. The company hit the $100 million revenue goal as it added Nike (NKE) to its growing list of costumers. The company is targeting $150 million in sales in 2016 and targets contract bookings of $275 million.


Although Plug Power has managed to deliver on its promises and its client list is growing, investors shouldn't be fooled by the sales growth and should avoid the stock for the time being.

Don't be fooled by sales

Plug Power has a history of cherry-picking the positives and reporting them in preliminary earnings report. While this tactic gives the stock a short-term boost, it comes crashing down when the actual numbers are released.

As a result, I don't think investors should trust Plug Power's sales estimates, and the actual numbers can paint a whole new picture. While I do not doubt the fact that Plug Power has hit its revenue goal, it is EPS that matters the most. Historically, Plug Power's gross margin has been negative as the company has been spending over $1 to generate $1 of revenue.

Since the company is selling its product at losses, I am not impressed by the growing list of clients. It is very easy to grow revenue when you are selling your products at a loss. Therefore, Plug Power's EPS may have gotten worse with the increase in revenue.

The company has not been profitable for years and with sales increasing, I expect its losses to increase as well. Consequently, I think investors should not be happy about Plug Power finally delivering on its estimates and should continue avoiding the stock until the official earnings report.

Conclusion

Plug Power's stock has risen following the news that it has hit its revenue target. But given the company's negative gross profit margin, investors should continue avoiding the stock. I believe increasing sales will lead to more losses and Plug Power will miss the EPS estimate yet again. As a result, I expect Plug Power to head lower after it releases its earnings.

This article first appeared on GuruFocus.

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