Good Bye, Plug Power. 📉 $PLUG (+9,5%)
In the meantime, the questions about the producer for fuel cells accumulated again. I had already clarified most of the contra-arguments in my anti-H2 series.
Nevertheless, I would now like to explicitly debunk the bubble around Plug and why this company does not deserve its rating.
I hope to present some comprehensible arguments. Therefore, please keep in mind that this is just an opinion.
1. the company
Plug was founded in the late 1990s as a joint venture between DTE and Mechanical Technology. $DTE (+1,32%) and Mechanical Technology. Listed on the stock exchange since 1999, it stirs up visions of the future. The company's image is modern, fully on trend. The technology is presented as groundbreaking and pioneering. The company has been able to attract some large and well-known investors such as SK $034730 have been attracted. The ETF hype for renewable energies reinforced this bias. Everyone wants to be in on it. No one wants to miss out, but no one wants to bet on the wrong horse either.
2. company structure and growth drivers
Plug is subdivided into various specialized subject areas. The overview and insight for interested parties are exemplary. On a higher level, Plug Power can be assigned to the areas of chemistry and energy.
The aim is to produce hydrogen sustainably with the aid of proton exchangers. For this purpose, the company offers entire electrolysers and fuel cells, as well as a wide range of equipment from the field of hydrogen applications.
The growth is considerable, but not in the core products of fuel cells and infrastructure.
According to the annual reports, refrigeration and engineering technology are achieving the greatest growth and therefore now account for half of fuel cell sales. The largest revenue is generated in the domestic US. After all, sales growth of a good 20% could be achieved here in 2022. The regions of Europe and Asia could be developed as a market.
3. hard facts.
So what's the problem? It all sounds very hip and is fully in line with the trend. You even grow.
Plug Power has always burned the money. There is no sustainable cost structure in sight here. The business is unprofitable. Capital increases are the result. Plug itself holds only 3% of its own shares. Just under 86% are in free circulation. By the way, each share has voting rights. This is therefore completely useless for a sustainable business model, since the company's own management can have virtually no influence on the business. Here, one is dependent on investors to constantly obtain fresh capital in order to be able to finance the company itself.
And the finances? - A horror story for any serious investor. No profits generated. More than a halving of the company's value from 2021 to 2022. No free capital.
And the future estimates? These are generally to be taken with a grain of salt with any stock, as analysts, some of them completely unfamiliar with the subject, refer to the strangest studies.
But even so, Plug will only be economically profitable in the distant future. Until then, the company will continue to happily destroy its own balance sheet and will not be able to eliminate the debt factor for what feels like an eternity. Where will the investors' capital come from then?
4 Destructive competitive pressure.
I wrote it in my 1st post, which was to debunk the hype about hydrogen. The industry is a superlative shark tank. Of course, people have recognized the market for hydrogen as an industry of the future. However, why should one focus on these small fish, such as Nel $NEL (-0,43%) , Plug or Ballard $BLDP (+6,9%) speculate?
The market for hydrogen is already there and divided among the top dogs. Hydrogen is not a new innovation! The difference is only in the sustainable production. However, almost all hydrogen producers invoke proton exchangers. The efficiency screw is technically limited. Therefore, one can only look in vain for breakthrough innovations between the individual companies in the producer list. The decisive factor will be market power and the associated pricing power through availability and supply agreements.
Please bear in mind:
The industrial gas producers, especially Linde $LIN , Air Products $APD (+0,04%) , Air Liquide $AI (-0,22%) and also Nippon $4091 (+0,26%) have decades of experience in their field. All of them have sustainable and solid business models. Although their stock market valuations are debatable, the facts and their dominance of the markets outweigh them.
In addition, there are other well-known companies in the energy sector with huge amounts of capital up their sleeves. Among them the Europeans Total $TTE (+0,86%) , Shell $SHEL (-0,74%) and BP $BP. (-0,03%) . Even today, hydrogen is an indispensable part of the refinery process. A hydrogen strategy is therefore inevitably conducive to the independence of oil companies from existing hydrogen producers.
5. a possible outlook.
Is plug sustainable? Certainly not. For that, the company is already in an advanced internal downward spiral. One should rather hope for damage limitation here. In its current state, Plug Power is not competitive as a company. The innovations that the company is striving for require additional capital that it does not have. In this respect, it is almost logical that the company will lose out in the further course of development. People have thrown themselves over within the value chain because they wanted to be more independent. A spin-off of certain areas would have been overdue in order to be able to concentrate on the core competencies.
I'm sure some people will want to argue, "But the inflation reduction act ..."
Keep in mind that this is a subsidy package designed to stimulate investment. Plug no longer has this money.
Therefore, in a continuing speculation, one can only hope that investors can be found to turn Plug around or even hope for a takeover by major competitors. However, it is simply exaggerated to believe that a company with sales of just under $700 million and sheer combustion euphoria can live up to a valuation of just under $6 billion.
