Why the Negative Thesis About PLUG Stock Is Off Base
Worries about Plug Power (PLUG) having to sell more stock appear to be way overdone, as the firm appears to be unlikely to need to do so for the foreseeable future. What’s more, it appears to be very well-positioned to obtain a meaningful number of large contracts going forward, while its valuation is attractive.
And as I pointed out in a previous column, Plug is poised to benefit from the increased use of hydrogen to fuel trucks and drones.
In light of these points, long-term growth investors should consider buying PLUG stock.
PLUG Is Unlikely to Have to Sell More Shares Anytime Soon
The many short sellers of PLUG stock (23.7% of its float was sold short as of July 31) are betting against the company largely because they expect it to have to sell many more shares of its stock to stay afloat. (That’s based on what I’ve seen them say in their posts on social media) But a look at the numbers indicates that such a scenario is highly unlikely to play out in the foreseeable future.
Last quarter, Plug’s free cash flow came in at -$100.4 million, and the company had $162 million of unrestricted cash and cash equivalents as of the end of the quarter. What’s more, the firm predicts that it will receive about $155 million of restricted cash over the next year, representing a quarterly run rate of about $39 million. Additionally, PLUG plans to receive a total of over $80 million from transactions related to its assets and it expects its cash burn to continue to drop going forward.
Add the $162 million, and the $80 million, plus the quarterly run rate of $39 million over Q3, Q4, and Q1, and you get $359 million. If the company’s free cash flow loss continues at the same level as in Q2, it should have enough cash to keep going without share sales until towards the end of Q1 of 2027.
And that’s without factoring in the cash-flow improvement that the firm says that it expects to occur in the coming quarters. (Indicating that Plug’s cash flow will rebound a great deal going forward,it expects to generate positive EBITDAS in Q4)
My calculations also do not bake in any additional asset sales or non-dilutive financing, despite the fact that the firm expects to ultimately obtain a total of over $275 million by selling assets and obtaining non-dilutive financing (that includes the $80 million figure discussed earlier).
Meanwhile, PLUG predicts that its operating income will turn positive at the end of 2027, so it probably won’t need a great deal of extra cash to fund itself starting next year. And even if it misses this target, its relatively small losses should enable it to obtain significant loans from banks and other sources at relatively low interest rates.
CFO Paul Middleton alluded to the latter point when he reported on the Q2 earnings call that “as we start approaching potentially positive operating cash flows, it opens up even more avenues for me for debt and capital solutions at lower cost options.”
Poised to Obtain Many Major Electrolyzer Deals Going Forward
Plug Power’s electrolyzer business looks poised to keep booming, as regulatory moves in Europe and two gigantic projects elsewhere are very likely to result in huge deals for the firm. As I noted in previous columns, the EU’s ongoing embrace of green hydrogen is likely to generate large amounts of revenue for PLUG.
In Spain alone, Plug believes that the country’s draft renewable fuels target “could drive approximately 10 gigawatts of electrolyzer demand by 2030.” CEO Jose Luis Crespo said on the earnings call. Already, among the projects in which Plug is involved, a 25-megawatt initiative by Iberdrola and BP (BP) in Spain has reached a positive Final Investment Decision (FID), while two projects in Span that Plug is working on with Acciona are “moving towards FID,” according to Crespo, and a 100-megawatt project by energy giant Galp in Portugal has reached FID. Crespo indicated that “many (other) projects” would attain FID by the "beginning of 2027.”
Outside of the EU, there have been new, encouraging signs that two huge deals that Plug won from Australia-based Allied Green will come to fruition. First, Uzbekistan Airports and the Uzbek government are backing Allied Green’s 2.4 gigawatt project in the Central Asian country. And suggesting that Allied Green’s 3 GW project in Australia remains alive, Crespo stated that Plug was working with the company to get it to an FID.
Plug’s Valuation Is Attractive
The shares are changing hands at a forward price-sales ratio of just 3.3 times, based on analysts’ average 2027 revenue estimate. That’s cheap, given the company’s strong growth and multiple, powerful, positive catalysts.
I am long PLUG stock.
