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PLUG Power (PLUG): Waking From Delirium

29 Apr

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It has become sport to spread plausible sounding untruths about PLUG in an effort to knock it off its proverbial high horse which momentarily has been done (though we have seen this play before and at a time when PLUG had essentially zero cash). And yet after all of the chicanery – the nonsensical valuations, the forever backward looking data points and most recently articles about the car market in which other than warehouse operations for its GenDrive and GenKey solutions PLUG has clearly stated it is not focused on, PLUG still powers on. I’m a bit surprised that there has been no response to the onslaught of such inept and dishonest coverage from other people who know better but those people are obviously just taking the opportunity to buy PLUG at these levels which to some degree I can’t argue with.

Here are a few bullet points for people to know and watch for in coming days:

  • The $124M offering is scheduled to close today or tomorrow. PLUG now has enough money in the bank to effectuate promising progression of its growth model which may include a strategic investment and/or acquisition. Our money is on the latter in service of the former. The raise seemed abrupt since a major GenKey announcement was in the offing, UNLESS, there was urgency for use of funds. That is of course, speculation, but it makes absolute sense in terms of the field of what is most logical. Otherwise PLUG could have simply waited for the GenKey news (which is clearly news since we have no idea who the automaker is or any details on what they purchased. What we have from Mr. Marsh is the interpretation that it is a “major” deal. Our speculation, given limited discussion, is that it is on the order of magnitude of the WalMart deal). 
  • An announcement of intention of use of funds.
  • Increased analyst coverage with what we believe will be $8+ price targets.
  • An announcement of the NA Automaker GenKey deal.
  • An announcement of further penetration into the range extender market.

Investors should be skeptical about any “news” coverage that is based on a false premise. The article about PLUG not being ready for the sporty car market was absurd in our view. Since PLUG has made no secret of its intention not to focus on that market, that should have been long investor’s first clue that it is open season on PLUG. In order to distract from current realities, a negative article about a market that PLUG is not in nor has current intention of pursuing moves to the fore. Why would one fail to discuss the addressable market for lift trucks which PLUG has penetrated to the reported tune of some 2% (which means there is very significant upside in this core market alone)? A small paragraph on PLUG’s website (plugpower.com) discussing the a demonstration of its GenDrive powered lift technology in concert with the WERC conference in Chicago sort of says it all in our view. 

“Finally, Plug Power will be hosting a tour at the nearby Central Grocers distribution center where invited guests will see a fleet of 250 GenDrive-powered lift trucks in operation. Central Grocers has been operating GenDrive units as the sole power source for its lift truck fleet since 2009, when its new state-of-the-art facility in Joliet, IL first opened.”

Let’s examine this little paragraph and posit on the present realities. The Grocer’s distribution center has been using these units exclusively since 2009. Why would they do that? Because it sucks of course and they don’t work…NOT! No one operates something so critical to their success and allows a demonstration at their facilities if they are not happy with the product. But more importantly, this distribution center is simply one drop of sand in a desert of opportunity for PLUG. If PLUG were to penetrate up to 30% of this market we would be talking about billions of dollars in forklift technology sales. But don’t pay attention to the market they are actively in, pay attention to the market they are not in and use that as a battering ram to wash moronic investors out of their positions. 

What about the delivery and transport truck market? There are millions of such vehicles on the road and among their chief concerns is not going from 0-60 in six seconds. Things like efficiency, range extension and low to no carbon emissions is what increasingly matters to the companies in that market. While we’re on that topic I’d be glad to trade you six seconds of time to stop a heck of a lot less to fuel up while doing my part to keep the planet intact. Having said that, if we one day hear about a FedEx driver trying to go from 0-60 in six seconds I’m guessing we will also find out that he was on LSD, was arrested, jailed, and promptly fired. But I digress…

The main point is that people are trying to tell you PLUG can’t play in a market they aren’t yet trying to play in… classic. How about the range extender market they are currently testing with FedEx? Hmm…why didn’t Trip Chowdhry write about THAT market instead of an inane comparison to Tesla cars? That market could well add a billion or more to PLUG’s top line as well. In any case, things will become clearer shortly. We will know soon enough what PLUG plans to do with their newly raised cash and I suspect it will be something that was worth doing the raise for right now rather than waiting until after they announced the GenKey deal with a North American Automaker.

It does strike me as amazing that the PLUG hit squad is this relentless. I’m not quite sure I have figured out why at this point but perhaps I’m not smart enough for that. I expect that short term gain comes easier with the negative but if we scored each one of these imbeciles for accuracy a few weeks or a month after their articles appear, each one would be bathed in shame. Andrew Left’s valuation is a prime example. He said PLUG was worth .50 and it promptly fell to $5.50. Maybe he felt if he had said PLUG was worth one dollar it would only have fallen to $6.35? Jim Cramer stated that PLUG and the other major fuel cell stocks were holding up a broader market correction a short while back (around the same time as Left’s gonzo analysis). That comment, as absurd as it was then, is beyond moronic at this point. So I’m sort of wondering what lunacy comes next. We’ve had innumerable pot shot articles from Seeking Alpha, The Motley Fool and others, most of which do not flesh out the addressable markets for PLUG’s current products and seem to give the company no credit for recent moves, moves which we believe will be perceived as nothing short of dynamic when viewed in a month’s hence rear view mirror.

For the record we bought PLUG all the way down on this latest ride and believe the valuation in 12 months will be beyond what many might think reasonable at this very moment. I will have much more to say in this and other forums as this story unfolds but for now we think this might be among the best buys in the market. 

One final note: Next week, on May 5th, we will be moving to a new site. The address is EdvaDaily.com. Don’t get too caught up in the “daily” part of the name as we consider that to be more aspirational than anything else and hope you will forgive us that. We do hope to write much more often and will include options for guest authors to write as well. We have not by any means cornered the market on good ideas so we will look forward to what you have to say. To date we have had visitors from 118 countries around the globe and have been appreciative of the many comments we have received. If you would like an update when our first and subsequent posts come out, please go to the new site and register. We don’t sell names or any of that nonsense as we abhor such practices.

As always, these are our thoughts and ideas only and are not a recommendation for anyone to do anything. Before you invest in this or any other equities please consult a trusted financial adviser.

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