Plug Power Stock Forecast: Selloff as shares have run too far, negative news flow increases

PLUG shares signed off 2020 with an incredible year of nearly 1000% gains. Yes, 1000%. The advent of a new year didn't seem to dent investor enthusiasm as PLUG added a further 100% or so to peak at $75.49 on January 25, 2021.

Plug Power Inc (PLUG) is a leading provider of alternatives to standard combustion power systems. PLUG is engaged in the design and manufacture of hydrogen fuel cell systems.

Plug Price Prediction

Plug Power shares have struggled as the company said on Tuesday, March 16 that information in previously issued financial statements should no longer be relied upon. 

"On March 12, 2021, management and the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, in consultation with KPMG LLP (“KPMG”), the Company’s independent registered public accounting firm, determined that the Company’s previously issued financial statements as of and for the years ended December 31, 2019 and 2018, and as of and for each of the quarterly periods ended March 31, 2020 and 2019, June 30, 2020 and 2019, and September 30, 2020 and 2019 (collectively, the “Prior Period Financial Statements”), should no longer be relied upon due to errors in accounting primarily relating to (i) the reported book value of right of use assets and related finance obligations (“ROU Accounting”), (ii) loss accruals for certain service contracts, (iii) the impairment of certain long-lived assets, and (iv) the classification of certain expenses previously included in research and development costs ((i) through (iv) collectively, the “Restatement Items”). In addition, the fourth quarter and full-year 2020 financial results and related discussion included in the Company’s shareholder letter furnished on the Form 8-K filed by the Company on February 25, 2021 should no longer be relied upon".

PLUG shares have understandably dumped since, falling over 100% and wiping out 2021 gains. 

This is serious business and investors are understandably nervous. Accounting issues are never good and, irrespective of the outcome, other headwinds await PLUG.

PLUG is currently loss-making with 2020 revenue of -$100 million and operating income of -$500 million. It has $618 million of long-term debt with $715 million in total debt. JP Morgan does not expect PLUG to turn a profit until 2023/2024.

The problem with the stock is twofold. First, it doesn't make a profit, however, it is a relatively new company so that can be overlooked. After all, Amazon is fairly new and the company went years without turning a profit. Full disclosure, I was a bear on Tesla! So taking into account PLUG's business plan, forecast growth, etc, there is definitely potential here.

However, where there could be some concern is the investor enthusiasm over the hydrogen fuel cells space. Hydrogen is a tricky, combustible element and requires quite a lot of energy to make it usable in a vehicular sense. Furthermore, its use is not exactly widespread and standard electric battery technology is likely to see much more widespread adoption and spread from cars to other transport sectors. PLUG focuses mainly on large industrial vehicles. I expect electric battery technology to improve at a similar rate to that of the PC evolution in the last decades, similar to technologies such as wifi, cellular networks, mobile phones, etc. Once a technology becomes widely accepted like electric cars, technology develops rapidly to meet demand. I expect this to happen to EV charging and charging networks to the point that electric batteries will be more attractive than hydrogen. 

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