I am neutral on Plug Power Inc. (NASDAQ:), as its strong growth rate and bullish Wall Street consensus are offset by its rich valuation and lack of profitability.

Plug Power, a major supplier of hydrogen fuel cell (HFC), for electric motors which are replacing traditional batteries and cars powered by electricity, is the leading company.

The company’s aim is to be a part of the paradigm shift towards sustainability in the power and transportation industry. (See PLUG stock charts on TipRanks)

Strengths

Plug Power has the distinction of creating the first commercially viable hydrogen fuel cell technology. It has installed more fuel cells for e-mobility (4000) than any other business in the world and it is the largest buyer of liquid hydrogen with an operating hydrogen highway throughout North America.

The company’s goal is to use renewable sources to create more than 50% of its hydrogen energy by 2024. In addition, the company plans to diversify its product line from forklifts to include heavy-duty trucks, zero emission light duty trucks, robots, data centres, and distribution centers.

Recent Results

Plug Power reported net revenue of $124.6 million in the second quarter of 2021, as compared with $68 million on a year-over-year basis. The company’s gross billings were $126.3 billion this quarter, showing an increase of 75%.

In the quarter, 3,666 GenDrive units were shipped, compared to 2,683 in 2020’s second quarter. 16 hydrogen infrastructure systems generated revenue, compared to four on an annual basis.

Plug Power has announced plans to bring its turnkey, green hydrogen solutions to Europe. Its headquarters are located in North Rhine-Westphalia (Germany).

Plug Power will be able to access a new market and build relevant partnerships with companies that are committed to making the switch from green hydrogen use to fossil fuel reliability.

Plug Power provides significant benefits for its customers, such as environmental preservation and fast fueling. It also offers lower operational costs and greater efficiency.

The company beat analysis’ estimates and saw success in this quarter, but continued to report a loss and a high burn rate, despite its growing revenue.

Plug Power has a lot of potential, but investors are still at risk.

Valuation Metrics

Plug Power stock looks pretty expensive at present with a forward EV/Revenue multiple of 19.9x. Additionally, the company continues to suffer heavy losses and spend cash.

The company’s growth is rapid with 52.5% revenue growth for the year and an expected 134.6% EBITDA increase in 2022. However, there are still many steps to be taken before its valuation will become justified.

Wall Street’s Take

From Wall Street analysts, Plug Power earns a Moderate Buy analyst consensus based on 12 Buy ratings, two Hold ratings, and one Sell rating assigned in the past three months. The upside potential for Plug Power is 45%, according to the $41.14 average PLUG price target.

Summary and Conclusions

Plug Power is enjoying rapid growth, and has fairly strong support from Wall Street analysts.

The stock trades at an extremely high price-to-earn ratio and must grow rapidly over the next several years to be worth its value.

It is also unprofitable, and it continues to burn cash. Therefore, the stock is considered a risky bet that it can become a profitable business.

Last but not least hydrogen fuel is facing significant competition from other clean energy technologies. It’s also highly speculative.

Disclosure: Samuel Smith didn’t hold any positions in the securities discussed in this article at the time it was published.

Disclaimer: This article is solely the author’s opinion and does not reflect the opinions of TipRanks and its affiliates. It should only be used for informational purposes. TipRanks cannot guarantee the reliability, completeness or accuracy of any information. The article does not constitute a solicitation or recommendation to buy or sell securities. The article does not provide legal, financial, investment, or professional advice. It also doesn’t take into consideration the individual needs or requirements. Neither is the information contained in it a complete or comprehensive statement about the subject or issues discussed. TipRanks or its affiliates are not responsible for the contents of this article. Any action you take based on the information is your responsibility. TipRanks’ or any affiliates does not endorse this article or make it a recommendation. Performance in the past is no guarantee of future performance, price or results.