Connect the power supply (NASDAQ: CAP) And Nicholas (NASDAQ:NKLA) represent two different ways to invest in the nascent hydrogen market. Plug Power sells hydrogen fuel systems for electric forklifts and other warehouse equipment, while Nikola develops semi-trucks that run on electric batteries and hydrogen fuel cells.
Both stocks initially attracted a rush of bullish buyers. Plug Power went public at a reverse split-adjusted price of $150 in October 1999, and its stock skyrocketed to a record $1,498 at the height of the dot-com bubble.
Nikola went public by merging with a special purpose acquisition company (SPAC) in June 2020, and its stock opened at a reverse split-adjusted price of $1,126.50 on its first day before reaching its all-time high of $2,391.90 over the following week.
But today, Plug Power and Nikola are trading at just $2 and $10, respectively. Let’s take a look at why these hydrogen stocks ran out of fuel — and which one might be the better turnaround play.
Plug Power still has a lot to prove
Plug Power has serious customer concentration issues. It generates most of its revenue by selling its fuel systems to Amazon And Walmart. But to keep these two big customers, it gave them stock warrants (options to buy additional shares of the company at a discount) to subsidize the fuel cells they bought.
This deficit strategy led him to declare a negative net revenue of $93 million in 2020, with financing costs from these incentives offsetting its customer payments. Plug’s revenue turned positive again in 2021, then grew 40% in 2022 and 27% in 2023, but its operating margins steadily declined as its net losses widened.
Metric | 2021 | 2022 | 2023 |
|---|---|---|---|
Income | $502 million | $701 million | $891 million |
Operating margin | (87%) | (97%) | (151%) |
Net profit (loss) | ($460 million) | ($724 million) | ($1.37 billion) |
Data source: Plug Power.
To make matters worse, the company delayed filing its 2020 annual report and had to restate all of its financial statements for 2018 and 2019. These errors, along with declining market interest in renewable energy stocks, have scared off bulls.
For 2024, analysts expect Plug Power’s revenue to increase just 4% to $926 million, its operating margin to improve to -89%, and its net loss to narrow to $826 million. mainly attributes The slowdown is due to macroeconomic headwinds that are pushing its major customers to scale back their major hydrogen fuel cell upgrades.
The company ended the first quarter of 2024 with just $173 million in cash and equivalents, but it recently secured a new $1.66 billion loan from the U.S. Department of Energy (DOE) to build up to six green hydrogen production facilities. This lifeline should give it a little more time to grow its business, but it has yet to prove its business model is sustainable.
Nikola overpromised and underdelivered
Nikola delivered just 79 battery-powered EVs and 35 hydrogen fuel cell EVs in 2023. That was well below the initial target of 3,500 BEVs and 2,000 FCEVs it set in its pre-merger presentation. It also recalled nearly all of its BEVs last year after a series of widely publicized battery fires. Nikola had originally aimed to generate $1.4 billion in revenue in 2023, but it’s falling far short of that target.
Metric | 2021 | 2022 | 2023 |
|---|---|---|---|
Income | $0 | $51 million | $36 million |
Operating margin | N / A | (1,378%) | (1,806%) |
Net profit (net loss) | ($690 million) | ($784 million) | ($966 million) |
Data source: Nikola.
Nikola founder and former CEO Trevor Milton was also convicted of securities and wire fraud in 2022.
Current CEO Steve Girsky says the company can grow its business and generate “$150 million to $170 million” in total truck revenue in 2024. Analysts expect it to generate $126 million dollars in revenue, with a net loss of $496 million for the full year.
That’s a bleak outlook for a company that had just $346 million in cash and cash equivalents at the end of the first quarter of 2024. It’s also constantly diluting its existing investors with new stock offerings to raise more cash. Over the past three years, Nikola has increased its share count by 242%, while Plug Power’s share count has increased by 30%.
Nikola believes it can overcome its growing pains, increase production and build more hydrogen charging stations with partner Voltera to support its fuel cell vehicles. But just like Plug Power, there is no clear indication that its business model can survive in the long term. Its electric vehicles could also face stiff competition from the auto industry. You’re herethe new Semi model from .
Best Buy: Plug Power
Plug Power and Nikola both look historically cheap, at 2x and 4x this year’s sales, respectively. Personally, I wouldn’t touch either stock until new green shoots emerge, but Plug Power’s higher revenue, DOE lifeline, and lower valuations make it a more compelling turnaround bet than Nikola right now.
Should You Invest $1,000 in Plug Power Right Now?
Before you buy Plug Power stock, consider this:
THE Motley Fool, securities advisor The team of analysts has just identified what they believe to be the 10 best stocks Investors Should Buy Now…and Plug Power Wasn’t One of Them. The 10 Stocks Picked Could Deliver Monstrous Returns in the Years to Come.
Consider when Nvidia I made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $757,001!*
Securities Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. Stock Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns as of June 24, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions at Amazon. The Motley Fool holds positions in and recommends Amazon, Tesla, and Walmart. The Motley Fool has a disclosure policy.
Best Hydrogen Stock: Plug Power vs. Nikola was originally published by The Motley Fool
