What Will Plug Power Stock Be Worth In 5 Years?

The market for hydrogen fuel cell technology is vast and promising. In light of improvements in production and distribution channels together with the positive policy and investment trends, the global hydrogen fuel cell market is projected to reach a value of $18.9 billion by 2033, expanding at a CAGR of 20.3%.

Plug Power Inc. (NASDAQ:PLUG) is a leader in the clean energy transition and orders for its products and services amounted to nearly $1.2 billion by the end of last year.

Still, Plug Power shares are volatile and the stock has suffered a steep price decline over the past decade, now trading well below the October 1999 IPO price of $15.

This year alone, Plug Power stock is down by almost 30%, so where will it be in the next few years?

What Is Causing the Bearish Momentum?

In 2023, the firm issued a going concern notice that would imply the firm might end up in a cash crunch. As an aside, a going concern notice often precedes bankruptcy.

While the company has already circumvented the issue by raising new funds, the net effect has been a high level of dilution to shareholders.

Despite the hydrogen supplier saying in March that it was not facing the problem of going concern anymore, shares fell further. The company also said that it had enough cash, together with the available liquidity, to fund its ongoing operations for the near future.  However, what kept investors worried were the steepening losses.

Profitability, or lack thereof, has proven to be a persistent challenge. The last few years have seen the all important bottom line suffer when operations expanded.

Besides the fact that the company has boosted the prices of all its products, including the equipment, service, and fuel, it has also implemented a revamp of its business model. Nonetheless, with the possibility of oversupply looming, the price hikes may bring a drop in sales amid the growing competition.

Though the company met challenges in cash management in 2023, this year financial efficiencies are targeted with a view to capitalizing on new market opportunities both in the short and mid-term.

How Plug Power Is Doing Financially?

Plug Power has not been profitable in any quarter since it was formed and is not expected to be profitable until it can generate revenue big enough to cover its expenses.

At the end of last year, the company posted a deficit of $4.5 billion. The firm has incurred further negative cash flows from operating activities and suffered net losses.

These losses amounted to $1.4 billion, $724.0 million, and $460.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Net cash flow from operating activities for the fiscal years 2023, 2022, and 2021 were $1.1 billion, $828.6 million, and $358.2 million, respectively.

For Plug Power, the revenue increased by 27.1% versus the previous year and culminated in $891.34 million in 2023.

The company will most probably be incurring operating losses in the immediate future since it has allocated a big chunk of capital to further optimize current production and management capacity, plan the construction of hydrogen plants, and innovate products and services.

Last year ended with $135.0 million of cash and cash equivalents alongside $1 billion of restricted cash and $822.2 million of net working capital. 

The cash burn alongside negative revisions from analysts and weak gross margins pose a triumvirate of concerns for shareholders so what does it all mean for the share price?

Where Will Plug Power Stock Be In 5 Years?

If analysts are correct in their price target assessments, Plug Power stock has the potential to rise 23.1% to $4.79 per share over the next 5 years.

In the midst of this fall in share price, Plug Power’s forward price-to-sales multiple stands at 1.60, which is deemed expensive when compared to its peers. Nevertheless, this is still about 90% lower than the 5-year average of 16.73x. Despite the downfalls in the past, the analysts seem to be optimistic about the future outlook anticipating a more than 120% upside.

Nevertheless, Plug Power is probably not fit for investors who are not ready to accept higher levels of risk.  The consensus rating of the stock is ‘Hold’ with 18 analysts advising to wait among the total 25.

Is Plug Power’s Strategy a Winner?

Plug Power’s penetration into the dynamics of the on-road vehicles, stationary power systems, and to new regions is confirmation of the company’s focus on decarbonization.

It is planning to expand manufacturing by gigafactories for electrolyzers and fuel cells, which are vital for their clean hydrogen ecosystem and the company has ambitions to build a clean hydrogen network in both the United States and Europe.

But the current lack of profitability and valuation implies poor free cash flow yield. The rapid evisceration of cash continues to be a major headache for management and shareholders generally. 

Adding to the woes is the highly volatile share price and bearish forecasts by analysts that signal profitability should not be anticipated over the coming year.

In short, both the profit and loss statement and balance sheet have enough anchors on them to drag them into deep waters, and it’s unclear whether management has the necessary life rafts or strategy to build them to keep the whole company afloat over the long-term.

Nonetheless, if analysts are to be believed, some reasonable upside exists now after the share price has fallen so much for so long.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.