Plug Power (NASDAQ:PLUG) has been moving up steadily over the last couple of months. Short interest has ballooned to new highs along the way, and the second quarter report, which is due on August 14 will likely make a big impact on Plug's share price and show if there is potential for a significant short squeeze. Judging from the recent announcements, strong backlog and bookings, it seems that Plug Power will beat revenue estimates while there should be less focus on earnings at this point in time. The Q2 report might prove as crucial for Plug Power as it will show if the company is really capable of ramping up deliveries in a meaningful way. I think that this might be the case, as Ballard Power (NASDAQ:BLDP) reported strong growth in materials handling in Q2 which leads me to believe that Plug Power is enjoying strong demand for its products.
What to look for in the Q2 report
There are several items that investors will be watching when Plug Power reports earnings on Thursday:
- Revenue growth. Analysts are expecting $16.7 million, which would represent a 123.2% rise from Q2 2013. The company expects to ship approximately 650 GenDrive units in the second quarter to customers including Wal-Mart (NYSE:WMT), Procter & Gamble (NYSE:PG), Volkswagen (OTCPK:VLKAY), Central Grocers and Ace. I believe that management has been conservative and I expect 700 to 750 unit shipments in Q2. Another reason I am optimistic is Ballard Power's Q2 report. Ballard reported 209% revenue growth in its materials handling segment. The growth is primarily due to growing fuel stack orders by Plug Power. This should provide enough upside to revenue estimates, along with continued ramp in services revenue. I expect revenue in the $17 million to $18 million range. Revenue might be lower if the company shifts some of its shipments to Q3 or Q4.
- Backlog and bookings. The company has increased its year-to-date backlog by 1,439 units to 3,719 units as of mid-April, which is almost triple the backlog from 2013. Plug Power has closed a significant number of GenKey deals, eight of them in Q1, while the Wal-Mart deal extension should further boost the backlog and we should see continued growth in backlog and bookings, which were $80 million at the end of Q1. The company is targeting $150 million in bookings for the year, and management stated in the Q1 conference call that they see about two-thirds of bookings on the way at the end of Q2. So, anything below $100 million in bookings would be a major disappointment, and I am targeting bookings at around $105 million to $115 million, and a potential $10 million to $15 million increase in full-year bookings target.
- Full-year revenue guidance. Management expects full-year revenue around $70 million. Given the recent developments and the expectations stated above, full-year guidance should be raised, and anything short of a $5 million increase would be a disappointment. I expect full-year revenue above $80 million, but management might not necessarily guide $80 million or higher in the second quarter announcement.
So, the Q2 report is of great significance for Plug Power's short and medium-term share price movement, as it will show if the company is benefiting from the momentum in its business since the expectations are already quite high, and management has set a high bar with recent announcements and previous goals. I believe that an in-line report would be a disappointment unless the full-year guidance is raised, along with a significantly higher backlog and bookings.
Short interest is still very high
Looking at Plug Power's short interest, it is easy to see that a great earnings report would cause significant demand for Plug Power's shares. This demand might come from natural buyers, and from short sellers which might choose to cover their positions after the Q2 report. Of course, the short-covering would largely depend on the quality of the report, and I would not expect a short-squeeze if the report is in-line or below views. The short-interest is even higher now given the high volume reversal after the Wal-Mart announcement on July 22, and the new data shows that the short interest has increased by 1 million to 37.7 million shares, which represents 25% of Plug Power's free float.
The second quarter report might cause a significant short squeeze and bring Plug Power closer to my $7.2 price target. The potential upside from the current price is 24%, and there might be room for upward revisions after the Q2 report, especially if the company reports above expectations. The company should also guide full-year revenue higher, and we should see a significantly increased backlog and bookings.
Disclosure: The author is long PLUG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. This article reflects the author's personal opinion and should not be regarded as a buy or sell recommendation or investment advice in any way.