A Quick Note On Plug Power's Q3 Earnings

By Unknown Wednesday, November 12, 2014
Plug Power's Q3 earnings illustrate just how risky investing in small cap (especially alternative energy) names can be. While we are fortunate to have built our core position in Plug around an average of $0.55 back in August 2013, most others are not. Our entry price allows us to easily stomach volatile price movements, like today's pre-market 15% haircut. Most others cannot.

The earnings release was no doubt a miss, but, if Andy is true to his word (which most would argue that he's not), Q4 is going to be a true blow out quarter. Here's why: Andy has reaffirmed FY14 revenue guidance of $75M as recently as one month ago in mid October. He has reaffirmed this $75M number at least a dozen times this year.

If Plug Power does in fact generate $75M in revenue this year, that means Q4 revenues will have to come in at a whopping $32.3M compared to Q3's $19.9M figure.

Plug has reaffirmed FY14 bookings of $150M a number of times, as recently as mid October. Current bookings up to Q3 now stand at $112.6M, which means Plug has to generate $38M in bookings in Q4. Given the fact that order bookings are extremely lumpy at Plug, it is possible.

And given Ballard Power's Q3 conference call hint, it seems likely to happen.

Andy has been touting since last year that on an EBITDAS basis, Plug would be profitable in FY14. I am skeptical and confident that this will not be the case.

Andy signaled last quarter that the company had a single $30M booking order expected to be signed by mid September, however, the company only booked $25.6M in orders in Q3. That is a red flag and may signal that the signage of that deal has been postponed, or dropped completely. Look for more color on that during the conference call.

The big highlight in Plug's press release, to me, was that Plug Power signed a new order deal with Coca-Cola. Coca-Cola hasn't ordered any GenDrive units from Plug Power for years. Coca-Cola last ordered 37 GenDrive units from Plug back in January of 2011. So, if Plug's booking with Coca-Cola is revealed to be much larger than 37 units, it serves as validation to Plug's GenKey product offering and signals that Coca-Cola may be looking at potential multi-site deals.

Going into the earnings conference call, it is key that Andy's FY14 revenue/booking guidance remains unchanged, and any color on upcoming deals can help salvage some of today's losses.

 Technically, Plug is still in a down trend from the March high, but as long as the stock holds $4.00, it seems to be setting up for a breakout towards the end of 2014. Any large booking deal announced in Q4 can help Plug break out of the 9 month downtrend.

The hype in Plug Power is still present, as shown by this StockTwit message volume chart. Expectations are too high, and people who jumped in on expectations of an earnings run only fuel the sell off. It may take some time for Plug to recover. I'd be comfortable adding to my position in Plug once the constant pumpers who live on the Plug stream and post links to things that have nothing to do with Plug are no longer on the Plug stream.....this may take some time though.

We remain long our core 2013 position with no intentions to sell, and we are still holding Jan 2016 $5 call options, with an intention to sell into a run-up....though this has obviously been delayed after today's results.

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The Wall Street Fox

The Wall Street Fox utilizes fundamental and technical analysis to generate investment ideas. TWSF holds a MBA, and is currently preparing for the Chartered Market Technician (CMT) designation.

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