Investors in Plug Power should stay vigilant regarding this crucial figure.
Plug Power's journey as a hydrogen fuel cell systems developer has been a rollercoaster for investors. Some years, the stock soared, offering impressive returns. Other years, it crashed, leaving investors counting their losses. This volatility reflects the booming-and-busting nature of the business, offering both lucrative upsides and daunting downsides.
Since 2020, Plug Power has experienced a staggering 186% surge in revenue. This growth has injected optimism into many investors, painting a bright future for the company. But there's another figure that investors should be closely watching.
The number that really matters for Plug Power
Revenue-wise, Plug Power is truly impressive, with sales growing almost 200% since 2000. Despite a temporary dip, the company's annual revenue for the past twelve months hovered around $660 million. These numbers are quite impressive for a company valued at $2.1 billion, operating in what could be a multi-decade growth story: the rising prevalence of hydrogen as a global energy source.
Given Plug Power's potential, it's tempting to view the company as a worthwhile investment. However, there's another figure every investor should keep an eye on now.
Despite Plug Power's revenue growth since 2020, the company has recorded more losses than ever before. Over the past year, the company netted a substantial gross loss of around $600 million – just a hair's breadth away from its total revenue. But why isn't profitability increasing in parallel with revenue? To understand this, we need to dive deeper into Plug Power's business model.
Plug Power primarily designs and manufactures equipment that allows businesses and consumers to utilize hydrogen, a cleaner alternative to more polluting fuel sources in industries like transportation, aviation, and cement production.
The only problem is, producing this hydrogen infrastructure is incredibly expensive. While advancements are being made, hydrogen technology still can't compete on cost. As a result, Plug Power relies heavily on smaller pilot projects and massive government subsidies to stay afloat. But in the long term, the company must find a way to achieve profitability—which is why I'm focusing on gross profits rather than revenue.
- Despite the surge in revenue since 2020, Plug Power's losses have also increased significantly, with a gross loss of around $600 million in the past year.
- For investors considering Plug Power as an investment, it's crucial to focus not only on the revenue growth but also on the company's ability to turn a profit, particularly in terms of gross profits.
- The high cost of producing hydrogen infrastructure is a significant challenge for Plug Power, as it relies heavily on subsidies and small-scale projects to stay financially stable.
- The booming-and-busting nature of the hydrogen fuel cell business, as seen in Plug Power's stock performance, underscores the importance of careful financial management and strategic investing in this sector.
