Plug Power (NASDAQ:PLUG) has demonstrated impressive top-line growth, and the PLUG stock perma-bulls will be sure to point this out. Yet, that’s not the full story. Even as Plug Power reports strong revenue and issues an ambitious outlook, the hydrogen and fuel cell producer seems to have trouble converting its sales into profits.
It’s no secret that Plug Power’s loyal shareholders have endured persistent losses over the years. You know it’s a bad sign when you see litigation alerts from legal firms to Plug Power’s downtrodden shareholders.
Can Plug Power and its stakeholders stage a miraculous turnaround in 2023? Anything’s possible on Wall Street, but caution is the best policy now. If Plug Power’s financial future resembles its past, the bad news will most likely outweigh the good.
PLUG Stock Traders Must Be Realistic
Alarmingly, PLUG stock has slid from $30 to $8 in less than a year. Knowing this, it’s time to let go of the hydrogen hype and be more realistic about Plug Power’s future prospects. Even if you have an optimistic vision of the hydrogen economy, this doesn’t necessarily mean Plug Power deserves your investable capital.
It’s all about ambition versus reality. Plug Power recently set a goal for 2023 of achieving 10% gross margin. Yet, during 2023’s first quarter, Plug Power reported having gross margin of -33%.
That’s far from ideal, and it’s unclear how Plug Power will swing from -33% to 10% gross margin this year. Plug Power set a gross margin target of 30% for 2026. It certainly would be nice to see a specific timeline and action plan detailing how the company will get from Point A to Point B.
Plug Power’s Revenue Objective May Be a Pipe Dream
Also, for 2023, Plug Power set a goal of generating $1.4 billion in revenue. Granted, the company did exhibit impressive year-over-year revenue growth in this year’s first quarter. Specifically, Plug Power reported $210.3 million in revenue, up 49% compared to the year-earlier quarter.
That’s fine, but Plug Power will have to continue growing its quarterly revenue to get to $1.4 billion this year. It’s possible, but it won’t be easy and PLUG stock investors shouldn’t just assume that Plug Power will succeed in this endeavor.
Besides, bottom-line results sometimes are more important than revenue. Plug Power’s deeply negative gross margin points to the company’s difficulty with converting sales to profits. In the same vein, it’s troubling that despite Plug Power’s potent revenue result, the company’s net earnings loss widened in Q1 2023 to $206.561 million, versus $156.489 million in the year-earlier quarter.
Don’t Ignore the Risks Associated With PLUG Stock
Strong belief in the hydrogen economy hasn’t helped Plug Power’s long-term investors. Even if Plug Power continues to grow its revenue, there’s no assurance that the company’s bottom-line results will improve.
In the final analysis, Plug Power is still an intriguing company that’s worth watching. Yet, financial traders should always consider the risks versus the potential rewards.
PLUG stock doesn’t currently appear to have a favorable risk-to-reward profile despite the company’s high hopes. So, don’t feel the need to jump into a trade that you might end up regretting. It’s fine to keep your eye on Plug Power without risking your hard-earned capital on the company now.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.