A hydrogen-powered forklift.SALVATORE SACCO
A renewed faith in the potential of fuel cells to power vehicles helped drive Plug Power Inc. shares to a 50-per-cent gain on Thursday.
The company, which sells fuel cell systems for forklifts and other materials-handling vehicles, has nearly tripled its share price in the past month after racking up orders from such big-name companies as Wal-Mart Stores Inc. and Procter & Gamble Co.
The share gains should be kept in context given that the Latham, N.Y.-based company's stock price is around $2 (U.S.) and it has a modest market capitalization of about $240-million. But the rise speaks to flickers of renewed optimism around the fuel cell industry, which enjoyed a huge runup a decade ago only to suffer a spectacular crash.
Plug Power had a market capitalization of nearly $8-billion at the turn of the century, when fuel cell companies were flying high on the promise of hydrogen-fuelled cars. It sunk as low as 12 cents early in 2013.
While many investors remain skeptical of fuel cells, Plug Power chief executive officer Andy Marsh says the gains of the past few months reflect an industry that is finally finding its way.
"We believe the company has been undervalued for a long time," Mr. Marsh said in an interview. He blames Plug Power's stock drop earlier this year on "financial distress" caused by quality issues it had in 2012. He acknowledges that many investors had given up on the promise of using fuel cells for commercial applications after being burned more than a decade ago.
"The technology probably wasn't quite ready in 2000," said Mr. Marsh.
Today, he argues fuel cells are becoming more accepted as a clean-energy solution, while newer technology helps to lower their cost.
"A good deal of emphasis has been placed on the industry to build a viable business model," he said, while claiming Plug Power will make a profit by mid-2014.
Plug Power buys its fuel cell stacks from Burnaby, B.C.-based Ballard Power Systems Inc. and integrates them into products used by companies such as Wal-Mart, Kroger Co, and Sysco Corp. in their warehouses.
During an investor update in early December, Mr. Marsh promised a "blowout" fourth quarter, with orders of more than $30-million, up from the low single digits in the first quarter of last year. Within days, the stock more than doubled to $2.24. The shares eased back until the company started the new year by confirming $32-million in orders for the fourth quarter. The kicker was when it said it expects the first quarter of 2014 to "meet or exceed the fourth quarter of 2013."
Plug Power closed up 78 cents to $2.33 on the Nasdaq on Thursday, with more than 52 million shares traded. That's up from average daily volume of about 6.6 million shares over the past three months.
Plug Power went public in October, 1999, at $15 a share, and climbed to a record $150 in 2000 (or $1,500 when adjusting for a one-for-10 reverse stock split in May, 2011). That's when Plug Power and competitors such as Ballard had the grand vision of trying to put fuel cells in every vehicle.
While Plug Power has more modest plans for the future that don't include cars, investors appear to be showing renewed enthusiasm for the notion of using hydrogen fuel cells in automobiles, according to analysts. Auto makers such as Hyundai, Toyota and Honda are said to be close to putting fuel-cell-powered cars on the road.
Investors that missed out on the 300-per-cent gain in electric vehicle maker Tesla Motors Inc. may be looking at hydrogen as the next big thing, said Dev Bhangui, an analyst at Toronto-based Byron Capital Markets Ltd.
"Right now these companies are trading on potential," said Mr. Bhangui, who covers Ballard and Mississauga-based Hydrogenics Corp., but not Plug Power.
Roth Capital Partners analyst Matt Koranda, the lone analyst covering the stock, rates Plug Power a "buy," but says risks for the company include competition from other fuel cell suppliers as well as slower-than-expected economic growth or a loss of government subsidies from within the U.S., its core market.