Why Plug Power, Bloom Energy, and FuelCell Energy Just Popped
Even after a big earnings miss this week, Wall Street is sticking with Plug Power.
Rich Smith
(TMFDitty)
I like things that go "boom." Sonic or otherwise, that means I tend to gravitate towards defense and aerospace stocks. But to tell the truth, over the course of a dozen years writing for The Motley Fool, I have covered -- and continue to cover -- everything from retailers to consumer goods stocks, and from tech to banks to insurers as well. Follow me on Twitter or Facebook for the most important developments in defense & aerospace news, and other great stories besides.
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Plug Power (NASDAQ:PLUG) stock took fuel cell investors on a wild ride yesterday, first sagging, then surging, but ultimately ending below where it started the day. The reason: Plug had just reported a $0.19-per-share loss for its fiscal third quarter -- a loss more than twice as large as what Wall Street had told investors to expect.
Today, Plug stock is rebounding strongly and rising a solid 9% as of 12:10 p.m. EST. It even seems to be taking some friends along for the ride, as peers Bloom Energy (NYSE:BE) and FuelCell Energy (NASDAQ:FCEL) rise 5% and 10%, respectively, alongside Plug.
You can probably thank Wall Street for the rebound.
In a note covered on The Fly today, Truist bank -- the former BB&T -- announced it is raising its price target on Plug stock by 22%, to $44, on hopes that the company will be able to make a good go of its new business electrolyzing hydrogen out of water, to create fuel for its and others' fuel cells -- and in hopes this will turn Plug Power's profit margins positive in future years.
Truist isn't the only analyst feeling optimistic about fuel cells. In a note that came out yesterday, but after earnings, investment banking giant Morgan Stanley said it saw "risk to the upside" for Plug stock. (Hint: Upside risk is the good kind of risk -- a sort of fear of missing out that makes you want to buy a stock before the train leaves the station.) Nodding along with Truist, Morgan Stanley also agreed that it sees "a pretty clear path to gross margin improvement" for Plug.
And yet ... Plug's not the only fuel cell stock rising here, is it? As noted above, Bloom Energy and FuelCell Energy are rising right alongside it -- yet no one recommended buying them today (or yesterday). No one said they see a path, clear or otherwise, to gross margin improvement for Bloom and FuelCell!
Does it make sense for those two stocks to be rising today? For that matter, does it even make sense for Plug stock to be going up?
Maybe. Plug did, after all, report a 34.5% increase in revenue in the fiscal third quarter and a 23% increase in GenDrive fuel cell units shipped in the quarter. That seems to speak well of its growth prospects, and of the rising popularity of fuel cells in general. Management furthermore promised better than 80% revenue growth in 2022 ($900 million to $925 million), saying it will hit $3 billion in revenue by 2025 -- up more than three times in three years.
And the company did improve its gross margins in the quarter -- albeit only from negative 26.7% to a slightly less negative 21.6%. So it seems the company is at least moving in the right direction on profitability as it scales up its business.
The real question is whether Plug can improve its profits fast enough, and turn profitable soon enough, before investors lose patience with it. I think that's a fair question to ask of unprofitable Bloom and FuelCell Energy as well.