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Turfscape (42.55)

PLUG gets a D

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May 24, 2011 – Comments (4) | RELATED TICKERS: PLUG

Latham, N.Y.

So, Plug Power, maker of fuel cell-powered lift trucks and pallet jacks for warehousing operations, has completed a 1-fo-10 reverse split of its stock (which temporarily changes its ticker symbol from PLUG to PLUGD). Forr quite some time, PLUG had been trading in the $.40 to $.60 range, with little hope of cracking the $1 mark anytime soon. Clearly the risk of NASDAQ delisting was looming large for the company, and the reverse split became rather necessary.

Plug Power is a company that I have wanted to like for a long time. Its a sort-of underdog that I can't help but root for. And this is a company that has made some very significant changes to drive itself towards profitability (not there yet, but gettting close). Significant corporate restructuring, ending their stationary power generation product line to focus on the lift trucks, manufacturing changes to drive costs down, so on and so forth.

But, ultimately, this is a company that just isn't there yet. And it may be a company that never gets "there". One critical mistake, in my opinion, was waiting far too long before they started focusing on profitability. Make no mistake, the changes instituted at PLUG over the last year or so have been big...but they may have been too far down the path for it to matter by the time these changes went into place.

4 Comments – Post Your Own

#1) On May 24, 2011 at 10:57 AM, mhy729 (30.09) wrote:

Is (was) this your favorite fuel cell company?  What are your thoughts on the others (e.g. FCEL, BLDP)?

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#2) On May 24, 2011 at 11:31 AM, Turfscape (42.55) wrote:

mhy729 wrote:
"Is (was) this your favorite fuel cell company?"

It's my favorite fuel cell company in the same way that the Brewers are my favorite baseball team. I'll root for them everytime, but I'm not plunking down money on them to win the World Series.

Honestly, I really do like what PLUG's leadership has done over the last year or so, and I think they will actually hit profitability sooner rather than later. But, it's still a far cry from a recommendable investment. And I would carry that same sentiment over to any fuel cell player.

There are a lot of risks in the businesss model right now. Fuel cell sales are heavily contingent on tax credits and rebates. Take those incentives away and sales drop like a rock. The technology has come a long way, but it's still a hassle to operate (primarily in instituting hydrogen fuelling). And the technology is going to stay where it is for the short-term because all the fuel cell players have burned through so much of their cash that R&D is largely taking a back seat to profitability. I don't think any of these three (BLDP, FCEL, PLUG) has a huge competitive advantage over the others, nor others, such as Hydrogenics (HYGS). I like Plug's niche in the warehouse transportation space...I think Hydrogenics has something going for it in that it produces hydrogen generation units (so that these fuel cells have something to run on). I'm really not a big advocate of fuel cell road vehicles, though. I just don't see that being a stronger alternative than full electric, hybrids, clean diesel or natural gas options.

I'm going to keep watching with interest, but won't be getting off the sideline to join the fuel cell game at any point in the next several months. Ultimately, there is good reason Steven Chu sought to slash Federal funding for fuel cell initiatives: the logistics just aren't there to be efficient or economical...yet.

The fuel cell industry has been primarily flat for two years, and will probably remain flat for the next year. Although, if oil/gas prices remain high, it could have a positive impact on fuel cell business. Or if congress decides to really push funding for fuel cells (with what money, I don't know) that, too, could positively impact these companies.

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#3) On May 24, 2011 at 12:54 PM, mhy729 (30.09) wrote:

Turfscape

Thanks for the detailed response!...much appreciated.  I haven't made many real-life investments in the alternative energy space, but it is a sector I enjoy reading up on.  Perhaps the one "alternative" energy sector I am considering at the moment is nuclear, in addition to "traditional" oil with a further dip (if it happens).  Also looking at nat gas.

Fuel cells are cool, but as you point out in your comments (which seems quite in-line with material I've read elsewhere) profitability may be quite a ways off.  I suppose we should be thankful to those other investors who provide the capital necessary for R&D to progress in the industry, losses and all.

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#4) On May 29, 2011 at 5:07 AM, jaketen2001 (66.62) wrote:

while the US has pulled back support for fuel cells, Germany is still going strong, and is executing a multi front strategy for introducing fuel cells in 2015--

Plug is more captive being here in the US with virtually no overseas sales, but the others, a majority of their sales come from overseas, cell tower backup, combined heat power devices-- 

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