The Truth About Plug Power

| About: Plug Power, (PLUG)
This article is now exclusive for PRO subscribers.

Summary

Plug Power is controversial.

I have called for breakeven finances this year and am set up for disappointment.

Two key pieces of news are driving swings.

What is really going on.

Plug Power (NASDAQ:PLUG) is a name rife with controversy. I am on record as to predicting profitability by the Q4 2016 report, and frankly, this looks like it's going to be a blown call. Time is simply ticking, and I am not sure that the company will get there. However, it is doing what is necessary to ensure future growth. I have to give the company that. I will discuss a recent development on this fact in a moment, but let me quickly remind you of where we are at in my call for profitability. After learning from a Form 8-K that Plug is working with Hercules Capital which provided the company with a secured loan facility to make acquisitions to grow, I said we needed to be shown the money. We learned that Plug is interested in a European company that develops technology to produce industrial gas supplies. Plug Power's management thinks that acquiring this company and fully integrating will advance its hydrogen fueling strategy as hydrogen fueling has been the backbone of the company's future. Time will tell. But since this news, the stock has sold off only to trade with extreme volatility in the last few sessions.

What is going on here? Well, first we did learn that the company has indeed surpassed its annual guidance for deployment of GenDrive units for 2016. Guidance called for 3,800 to 4,000, but the company delivered 4,010 units in 2016. That is a plus. Many of these went to high-profile names like Home Depot (NYSE:HD), Wal-Mart (NYSE:WMT), BMW (OTCPK:BMWYY) and more, as discussed throughout 2016. We then learned that the company has shipped its very first production of ProGen engines for electric vehicle range extenders. This product greatly extends the life of electric vehicles making them a reality for commercial applications. This includes serving governments, transportation companies and shipping companies. In addition and what is really driving the action is that Plug is out with news that it will host a conference call on February 24th to discuss "preliminary 2016 results" as well as expansion and growth plans for 2017. I am sure that shareholders are looking forward to the news, but I can say with certainty that the name is likely not going to hit my goal of breakeven.

It seems to me, and I may be wrong, that the company is going to first pre-announce a bad quarter, and then soften the blow with positive 2017 news. This would explain the extreme volatility in the stock the last two sessions and also would make the most since as the call will include preliminary 2016 results. In the end, I think shareholders are up for disappointment. While I think the company has definitely turned around, the market has soured on this name.

While the company has turned around, it needs to make a big push toward that breakeven mark financially or the stock will continue to suffer. The debt is worrisome. The rise in the stock from penny status was spurred by some hope of new customers being on board, but the name is now below the $1.50 mark. Remember this game is about expectations. The company is failing to meet a number of expectations (including my own), keeping the stock trading sideways to down. I like that the company is on pace for another record year with contracts from new and long-standing customers. I am excited for the 2017 growth plans, but without financial performance to back up the name, as an investment, shareholders will continue treading water.

I am rooting for the name to do well, but the market is speaking. What do you think? Do you see the company continuing to burn cash? Do you see profitability? What do you make of the in-house financing? Is it more window dressing or is there a future here?

Note from the author: Quad 7 Capital has been a leading contributor with Seeking Alpha since early 2012. If you like the material and want to see more, scroll to the top of the article and hit "follow." Quad 7 capital also writes a lot of "breaking" articles, which are time sensitive, actionable investing ideas. If you would like to be among the first to be updated, be sure to check the box for "Real-time alerts on this author" under "Follow."

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.