Plug Power (NASDAQ: PLUG) stock is down 13% or so on the back of the Q2 and so H1 results. PLUG stock has declined because the losses have widened out unexpectedly. And the awful thing is that there’s no obvious and clear direction or timescale for the losses to stop. If you’re making gross margin then clearly sales can grow in order to cover overhead. Or at least they might, they could. But if gross margin itself is negative then a rather more substantial reset might be necessary. Which is what the current problem seems to be.
Plug Power is actually in a very interesting market area: “Plug Power Inc. delivers end-to-end clean hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, stationary power market, and others in North America and internationally. It engages in building an end-to-end green hydrogen ecosystem, including liquid green hydrogen production, storage and handling, transportation, and dispensing infrastructure.” We think it’s pretty obvious that hydrogen - especially green hydrogen, from renewables derived energy - is going to be at least part of the climate change solution. So, we’re cool with the idea of what the company’s doing. We’re also aware that new technologies lose money as they are being developed.
Plus Power share price from Google Finance
But here’s the problem: “Plug Power (NASDAQ:PLUG) -5.6% post-market Wednesday after reporting a larger than expected Q2 GAAP loss, although it said electrolyzer revenues should increase "substantially" during this year's H2. Q2 net loss increased to $236.4M, or $0.40/share, from a loss of $173.3M, or $0.30/share, in the year-earlier quarter, but revenues rose 72% to a higher than expected $260.2M from $151.3M a year ago.”
It’s the detail within that which worries us. As above, if it’s overheads causing the problems then as sales revenue grows then the gross margin being earned will eat away at the loss from those overheads (or R&D costs and so on). But the problem here is that gross margins are negative. Cost of Goods sold is higher than revenues from selling those goods. So, increased revenues mean increased losses - even before any contribution to overhead costs.
That then means that something substantial has to change, production costs, or selling prices, something. Because losing money on every piece sold and trying to make it up in volume is one of those tactics or strategies that just doesn’t work. Something really does need to change here at Plug Power.
