- Plug Power (PLUG) stockholders are looking for some relief after a steep share-price slide.
- Relying too much on Plug Power’s bragging points could cause some folks to make a hasty investment.
- Investors should weigh all of the available data carefully and then consider taking either a small stock position in Plug Power or none at all.
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Latham, New York-headquartered Plug Power (NASDAQ:PLUG) is a well-known hydrogen fuel cell manufacturer that has a dedicated following of investors. The company is an innovator in the industry — no doubt about that. Still, PLUG stock should only be purchased now in small quantities or not at all.
To be a fully informed investor, it’s necessary to dig deeper than a company’s bragging points. After all, the purpose of press releases and shareholder letters is usually to get investors interested in the company.
In other words, companies aren’t always lying, but they might bury the unpleasant facts at the bottom of the page. Plug Power shouldn’t necessarily be blamed for doing this, as it’s the investors’ responsibility to read all documents fully.
As we’ll see, there’s data that Plug Power is clearly proud of and facts that the company might not be so proud of. That’s fine, but be sure to stay objective and weigh all of the relevant facts before making any trading decisions about Plug Power.
Plug Power Inc.
What’s Happening With PLUG Stock?
It has been quite a roller coaster ride for PLUG stockholders in 2022. The share price sailed above $30 in April only to slide back to $16 in May. This is a disappointing result and undoubtedly Plug Power’s loyal shareholders are seeking reasons to stay in the trade. Could the company’s first-quarter (Q1) 2022 financial results provide some fodder for the bulls?
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Indeed, Plug Power’s investor letter serves up a positive data point right at the top of the page. In particular, the company reported $140.8 million in revenue during Q1 2022, representing an impressive 96% year-over-year increase.
So far, so good. The company also touts its “Strong Balance Sheet to Execute on Growth Objectives” on the front page. And indeed, nearly $2.5 billion in cash and cash equivalents at the end of 2022’s first quarter is indicative of balance-sheet strength.
The Bad News
Again, though, seeing the full fiscal picture sometimes requires some digging. Thus, scrolling down to the last page of Plug Power’s investor letter and reading the tiny print will reveal some less-than-stellar results.
Specifically, Plug Power was already operating at a roughly $60.7 billion net loss during last year’s Q1. This year, the company’s Q1 net loss ballooned to nearly $156.5 billion.
Therefore, investors should monitor Plug Power’s bottom line before buying shares in the company. In upcoming quarters, they should hope that Plug Power reports a narrowing net loss.
They’ll also want to keep an eye on commodity prices, especially the price of natural gas. That’s because, as Plug Power acknowledged, “We expect margins to remain under pressure in Q2 2022 driven by continued increase in natural gas prices.”
Increases in hydrogen molecule costs are associated with higher natural gas prices. So, if the natural gas price continues to move up, this could continue to weigh on Plug Power’s bottom line.
What You Can Do With PLUG Stock
Plug Power’s recently released quarterly results present a good news, bad news scenario. The company’s revenue growth is encouraging, but prospective investors should want to see a narrowing net earnings loss.
It’s fine, nonetheless, to take a small position in PLUG stock if you feel that natural gas prices will come down, or that Plug Power’s bottom line will improve. Just don’t go overboard in buying the shares since more downside is a definite possibility.
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.
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