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Plug power predictions7/8/2023 The longer-term story is a marked improvement in profitability against cash flows that are set to remain negative. 2023 revenue is set to be around $1.4 billion with gross profit margins at 10%, this will rise to sales of $2.1 billion in 2024 with gross profit margins of 25%. The company is guiding for brighter days ahead. Cash and equivalents are declining precipitously and reached $2.16 billion as of the end of the fourth quarter, down from $3.9 billion in the year-ago comp. Whilst Plug Power would see its fourth-quarter gross margins improve year-over-year from negative 54% to 36%, the overall direction of its operations is likely still poor. Net income was negative at $223.5 million with cash burn from operations at $306.57 million. Plug Power would report revenue of $220.7 million for its fiscal 2022 fourth quarter, a 36.3% increase over the year-ago comp but a miss by $48 million on consensus estimates. The company's surge to new highs came on the back of broadly negative gross profit margins, high net losses, and deepening cash outflows from operations. The highly lauded partnership with Fortescue Metals to build what would have been the world's biggest electrolyzer manufacturing plant in Australia was ended due to unit economics that management stated "they could do better" on.Ĭritically, Plug Power's own economics did not matter to shareholders for some time. Whilst these new partnerships lay at the core of the company's long-term investment case and would complement management's target to increase liquid green hydrogen production to 1,000 tons per day by 2028, Plug Power has to be able to prioritize its capital expenditure. This is not expected to start production until 2026 and is still subject to a positive FID by Uniper. The company also notched a partnership with Germany's Uniper for the design of a 100 MW electrolyzer. Plug Power is set to contribute just under half of this amount, corresponding with its 49% stake in the partnership. Plug Power just announced a partnership with SK E&S, a South Korean LNG company, to jointly build a $710 million gigafactory for the production of hydrogen fuel cells and water electrolysis systems. Hydrogen To Tackle Climate Change As Partnerships Ramp Up And Down Hydrogen is set to play a material role in this. The global momentum is getting intense with the EU boosting a target for the share of renewable energy in its energy mix to 42.5% of total consumption from 32% by 2030. The 2022 US Inflation Reduction Act looks set to open the floodgates to North American hydrogen adoption and provides a significant $3/kg production tax credit for green hydrogen production. Bulls would of course be right to highlight that the post-pandemic reality is increasingly being defined by a near-visceral need by most developed economies to transition to greener sources of energy. The company is still trading at a sales multiple that is 500% more than the median multiple for its peer group. Hence, the current pullback has realigned Plug Power with its pre-pandemic trajectory in many ways. Indeed, the Latham, New York-based company would see its sales multiple go north of 700x. The pandemic years were abnormal with widespread euphoria around the potential of hydrogen to facilitate the decarbonization of carbon-heavy industries driving Plug Power's multiple to highs that could only be prudently described as stratospheric. The company is now swapping hands at a 7.68x price-to-sales multiple, an 83% decline versus its five-year average multiple of 45.18x. The last year has been brutal for hydrogen stocks with Plug Power ( NASDAQ: PLUG) down 56% to trade at its lowest level in three years.
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