At the beginning of last year (2021) there was Power plug (WKN: A1JA81) shares still at € 61.47. Today they are only 15.04 euros (05/10/2022). However, the hydrogen and fuel cell company is growing a lot. While sales last year (2021) were $ 502.3 million, by 2025 they should already be $ 3,000 million.
Throughout the many support measures there has been great euphoria over hydrogen values in 2020. It has largely disappeared with inflation and rising interest rates. Today, Plug Power stock is only quoted at a price / book ratio of 2.67 (05/10/2022).
Rising costs are putting Plug Power to the test
In the first quarter of 2022, the American company increased its sales by 95.7% to $ 140.8 million. This initially means that the demand for products will continue to grow, but the operating result is decisive for the price of the stock. On the other hand, it worsened from -48.3 to -103.8 million US dollars due to the sharp increase in natural gas and logistics costs. Net profit fell from – $ 60.75 million to – $ 156.5 million.
Above all, high natural gas prices are weighing on the hydrogen fuel business. The company does not expect a significant turnaround here until 2023.
However, the costs are also increasing due to the expansion of the company and the building of business. With a loss per share of -27 cents, Plug Power missed analysts’ estimates of -16 cents. The high costs therefore remain a burden for the company and the share at present. He doesn’t expect any short-term relief.
Plug Power is working on a margin improvement
Only when the situation in the commodity markets eases, Plug Power will suddenly see upward results. Meanwhile, the company is looking to reduce logistics costs and improve system efficiency. By 2025, it aims to achieve an operating margin of 17% and positive cash flows through business downsizing.
Plug Power is aiming for a 30% reduction in unit service costs over the next 12 months and 45% by the end of 2023. With its new GenDrive fuel cell, the company has already improved its service margin by 30%. % compared to the fourth quarter of 2021. The fuel cell business is expected to break even by the end of 2022.
“We are on a learning curve. Every time we double our volume, our system costs go down by 25%. In the electrolyser business, we plan to reduce costs by 60 to 70 percent by 2025, ”the quarterly report states.
In the current situation, the solid balance sheet speaks in favor of Plug Power. It has an equity ratio of 77.1%. Cash and cash equivalents of nearly US $ 2.5 billion are offset by liabilities of just US $ 1.3 billion. This is how the company can survive the current difficult economic situation.
The Plug Power share article: why it falls despite a 95.7% increase in sales! first appeared in The Motley Fool Germany.
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Christof Welzel does not own any of the shares mentioned. The Motley Fool does not own any of the titles mentioned.
Motley Fool Deutschland 2022