Plug Power’s Problems Persist. Should Investors Abandon the Stock?

The problems that have afflicted Power supply by socket (NASDAQ: TAKE) The company continued to post disappointing results in the second quarter. The stock has lost about 80% of its value over the past year.

Let’s take a closer look at the problems the company is facing and whether it has any chance of turning around.

Power Plug Problems

The biggest problems facing Plug Power are negative gross margins and cash outflows. The company has found a niche in selling fuel cells used in forklifts and other material handling equipment for high-volume warehouses. However, as part of those deals, it has long sold the hydrogen fuel needed to power those devices at a loss.

That trend continued in the latest quarter, with the company posting a gross loss of $131.3 million. That’s worse than the $78.1 million gross loss it posted a year ago, but it’s an improvement from the $159.1 million gross loss it posted in the first quarter.

For the second time this year, in addition to negative gross margins on fuel, it also recorded negative margins on equipment. gross marginsOn the positive side, its negative fuel gross margins have seen some improvement thanks to the green hydrogen production facilities the company has built.

Building hydrogen production plants to supply hydrogen to its customers is an important part of its plan to achieve positive gross margins on the fuel. Increased production at its Georgia plant, along with some price increases, have helped fuel that improvement. In the meantime, it plans to build a new hydrogen plant in Louisiana as part of a joint venture with Olin will begin producing hydrogen in the fourth quarter.

Because the company sells both its equipment and fuel at prices below what it costs to produce them, Plug Power has continued to rack up losses and burn through cash. During the quarter, the company posted a loss of $262.3 million, or $0.36 per share. Meanwhile, it posted an operating loss of $1.2 billion. cash outflows of $254.7 million, while its free cash flow was negative $350 million.

Looking at Plug Power’s balance sheet, the company has $214 million in debt against $62.4 million in cash. It also has $956.6 million in restricted cash. This restricted cash comes largely from prior sale-leaseback agreements that will be released over the lease term and, to a lesser extent, from letters of credit secured by security deposits.

Given the lack of cash available on its balance sheet, the company has been aggressively selling shares to fund its operations and the continued development of its hydrogen plants. During the quarter, it received net proceeds of $266.8 million from the sale of shares and $572.1 million during the first half of the year.

The story continues

To put Plug Power’s cash burn and capital raises into perspective, the company only has a market cap of about $1.8 billion based on its most recent share count.

Are Plug Power problems fixable?

It is possible that the company can solve its problems, but that is becoming less and less possible…