Plug Power: Change in Accounting Principles

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The new non-GAAP accounting is still creating confusion. Based on non-GAAP, Plug managed to increase revenue in the second quarter to above USD 36 million. But although the USD 13 million loss that the company reported for the same period was indeed a reduction compared to growth, it continues to have a negative impact on the stock price. Many of the company’s agreements are lease contracts and partial revenues must be recognized in each period. By its own account, Plug is working to provide greater clarity here.

A very important factor will be the legal certainty surrounding tax incentives for fuel cell systems, as the relevant rules will expire by the end of 2016. A clear-cut decision in favor of tax incentives/depreciation will give Plug’s share price a big boost. Other large customers of Plug’s, such as Carrefour in France, show that the company’s business model works. It could also be interesting to see whether a corporation like Federal Express will place an order with Plug for retrofitting an entire fleet of airport supply and courier vehicles after having successfully completed the trial runs. An order of this magnitude could rake in a lot of money – I would think as much as USD 100 million over the long run. Plug’s primary source of revenue from these kinds of contracts will be the sale of hydrogen, although retrofits will play a role as well.

Risk warning

Investors must understand that buying and selling shares is done at their own risk. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they do not represent stakes in big companies and the volatility is significantly higher. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the assessments put forth in this article represent exclusively the author’s own opinion. This article focuses on mid-term and long-term perspectives and not short-term profit. The author may own shares in any of the companies mentioned in this article.

Author: Sven Jösting

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