Plug Power Might Have Learnt How To Under Promise And Over Deliver

  • PLUG Power Inc (NASDAQ:PLUG) downplays its projections for the year 2015.
  • Markets still bullish on company’s prospects.
  • Company expected to improve upon its performance in the coming year.

Based on its actual performance in the previous three quarters, Plug Power (NASDAQ:PLUG) has shown restrain while releasing projections for the coming Q1-2015. The idea is simple – rather than over promise and under deliver, the company has now decided to under promise and over deliver. In the past three quarters of 2014, the actual losses have mostly exceeded the estimates, which is a de-motivator for the stakeholders. The actuals versus estimated figures can be compared as follows:

Plug EPS - actual Vs Estimates

The Company In Red Yet Analysts Are Bullish

In Q3-2014, the company delivered actual loss of $0.04 per share against revenue of $19.9 million, while the estimated figure was loss of $0.03 per share against revenues of $24.4 million. For Q4-2014, the analysts are expecting a loss of $0.04 per share against revenue of $26.67 million. It may be noted here that in Q4-2013, the actual loss was $0.08 per share while the revenue was $8.03 million.

plug power revenue

Based on the company's previous performance, the analysts are still bullish for the company and are estimating revenue of about $123 million in 2015. However, the management is downplaying the figure and is estimating the Plug revenues only “in excess of $100 million”. The management has announced that the GenDrive (its leading product) margin would come to around 29% for FY 2015.

Management’s Guidance Reflects Pro-Activeness

It seems that the logic behind the lower revenue estimates for the year is to play with the sentiments of the markets. Whenever the actual performance fails to live up the market expectations, it mostly sends a bearish outlook and the stock price tumbles.

The management had made a few great commitments for the company in its business update meeting in December 2013. This included a target of $70 million revenue and $150 million of bookings in 2014. The other two promises included a big contract, with one of its clients and product EBITDAS breakeven (Earnings before interest, tax, depreciation, amortization and stock based compensation) by the end of second or third quarter. However, towards the end of 2014, it became clear that the company was not in a position to fulfill all its commitments, though it fulfilled one of the major contracts. The bookings fell short by over $30 million by the year end and the revenue figure were also below the estimated figure of $70 million.

Even the EBITDAS figure was nowhere near the breakeven point even towards the end of the financial year 2014. By this time, the company had made a reputation for itself for over promising and under delivering, which was not working favorably for its image in the stock market.

So, this year, it seems Plug Power Inc has come up with a strategy of under promise and over delivery. The CEO, Andy Marsh, explains the reason behind this strategy as they do not want to be looked upon as failures by the investors in case the target falls short even by a small margin. Instead beating the target by a huge margin, they want to be looked upon as extremely successful performers.

Contracts and Customers

plug power consensus eps estimates

Here, it may be pointed out that the market forces are currently in favor of the stock, since the company is expected to improve its performance in the coming year as well as in the long run. PLUG Power Inc (NASDAQ:PLUG) has entered into a multi-year contract, with SouthernLINC Wireless, a wholly owned subsidiary of the Southern Company (NYSE:SO). This was announced last month by the CEO, Andy Marsh. As per the contract, PLUG Power will provide RELIOn, its integrated fuel cell solutions and GenFuel hydrogen services for use, by SouthernLinc in its wireless network. The latter is expected to come up with 500 new LTE sites in its wireless communication network. RELIOn is PLUG’s hydrogen fuel cell based back-up power system, which will be used by the telecommunications company in order to supplement batteries and replace diesel-fuel generators as a means of backup power application.

It may be pointed out here that currently, Plug has a strong customer base including WalMart (NYSE:WMT), FedEx (NYSE:FDX), Volkswagen AG (ADR) (OTCMKTS:VLKAY), Bayerische Motoren Werke AG and others. Also, it has already bookings to the tune of $200 million in 2015, which is quite an encouraging figure. Moreover, bookings are a direct indicator of the company’s performance in days to come.

In financial year 2015, the company intends to increase the number of GenDrive fuel cell units to 3,300 from 2,600. Also, the CEO has announced that 15 new GenFuel hydrogen infrastructure sites would be installed in 2015, while there were only 9 stations in 2014. Given the fact that PLUG Power Inc (NASDAQ:PLUG) deals in alternative source of energy and this sector is expecting to see a boom in next few years, the company has prospects of moving up the ladder of growth and success in the years to come.


Based on the above analysis, one can infer that though the future prospects looks promising for Plug, though it will take some time before the company turnarounds and actually starts reaping in profits for its stakeholders. The company is definitely a good player in the long run and one can invest if looking for long-term benefits. However, for short-term, investors are advised to be cautious before making a plunge.

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Neha Gupta Neha Gupta   on Amigobulls :

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