When a company issues a quarterly press release, typically it will put a positive spin on the company’s recent performance. That’s fine, but it means that investors should view Plug Power’s (NASDAQ:PLUG) latest earnings letter with a skeptical eye. After delving into the data, financial traders should seriously think about avoiding PLUG stock.
The point here isn’t to disrespect Plug Power as a company. It’s certainly one of the most ambitious players in the green hydrogen space of the 2020s. For instance, Plug Power is reportedly borrowing as much as $1.5 billion to fund the construction of hydrogen plants.
But then, borrowing money could put negative pressure on Plug Power’s financials — which, as we’ll discover, aren’t ideal. All in all, PLUG stock is vulnerable to a sharp drawdown despite the management’s apparent optimism.
The Good News About Plug Power
To be fair and balanced, I must acknowledge a bright spot in Plug Power’s second-quarter 2023 earnings results. As it turned out, Plug Power generated revenue of $260.2 million, thereby beating Wall Street’s forecast of $237.7 million.
Looking ahead, Plug Power expects to generate full-year 2023 revenue in the range of $1.2 billion to $1.4 billion. It’s fine to be optimistic, but Plug Power also needs to be realistic.
Mathematically, if all four quarters were like Q2 (with $260.2 million in revenue), then Plug Power would only generate $1.04 billion in full-year 2023 sales. Furthermore, the company reported only $210.3 million in first-quarter 2023 sales.
Therefore, Plug Power will somehow need to post unusually strong quarterly sales figures in order to reach $1.2 billion to $1.4 billion for the full year. This is, in my estimation, a setup for disappointment in the coming quarters.
PLUG Stock: Beware of the Positive Spin
I hate to be the bearer of bad news, but Plug Power has a consistent track record of missing analysts’ quarterly earnings per share (EPS) estimates. Moreover, Q2 2023 continued the pattern of this unfortunate track record for Plug Power.
Wall Street wasn’t particularly optimistic, as analysts predicted that Plug Power would report a quarterly earnings loss of 27 cents per share. In actuality, Plug Power lost 40 cents per share.
Nevertheless, Plug Power’s management decided to put a positive spin on the company’s bottom-line results. Three different times, Plug Power used the phrase “path to profitability” in its second-quarter investor letter.
Let’s see if Plug Power is actually on a “path to profitability,” though. In the year-earlier quarter, Plug Power incurred a net earnings loss of $173.3 million. The company’s net loss in Q2 of 2023, however, was $236.4 million. So, the hard facts don’t seem to support Plug Power’s positive spin job.
Keep Away from PLUG Stock in 2023
It’s fine to acknowledge Plug Power’s relatively robust quarterly sales. On the other hand, it’s not guaranteed that Plug Power will reach its full-year revenue target range.
Besides, skeptical investors should question whether Plug Power is truly on a “path to profitability.” Thus, for the remainder of this year, financial traders would be wise to avoid PLUG stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.