Spiky Plug Power Catalyst

The Business Review’s Barbara Pinckney wrote an interesting article about Plug Power ($PLUG) titled “5 Questions for a Happy Andy Marsh”.

The article ends with Marsh saying “I would be watching sales over the coming months. Watch where sales are coming from.”

A critical piece to our $PLUG investment thesis is the impressive client list.  Well-known companies like $WMT, $KO, $SYY, $PG, and others are buying Gen-Drive units to power forklifts at distribution and assembly centers.  For the most part, conversion to $PLUG powered centers has been on a limited or test basis.  We find it interesting that $WMT has eliminated its battery room in its latest deployment of $PLUG’s solution. If this was an experiment, it would have most likely kept its battery room.

Andy’s comment leaves open the possibility that a big customer may be rolling out hydrogen-powered forklifts at multiple centers on a more widespread basis.  Let’s use $WMT as an example, although we could use any of the above listed customers here.  Currently, $PLUG is in just a handfull (less than 5) of $WMT’s 168 nationwide distribution centers.  If $WMT were to announce a multi sites deal with $PLUG, it would mean significant revenues.  On average, each of $WMT’s 168 centers have more than 100 forklifts. Assuming $PLUG sells its solution for $18,000 a unit, this business has at least $300 million of revenue potential.  In addition to direct revenue, this kind of buy-in from a company like $WMT would be a “proof of concept” as to the benefits of the $PLUG product.  These two factors, in our opinion, would serve to move the stock much higher.

Of course, we have no direct evidence that $WMT (or any customer, for that matter) is signing up for $300 million of GenDrive units this year.  We are merely pointing out the potential opportunity here, should a customer increase the pace of $PLUG solution deployment.

Here is what Marsh said during the first quarter earnings conference call:

We are also quite excited to announce that the Wal-Mart Washington Courthouse Ohio Distribution Center completed deployment of over 250 GenDrive units powering their forklift truck fleet and have removed their battery room. 3 or 4 of our largest customers discussing multiple distribution centers, up to 5 in some case, where they’re looking to migrate to fuel cells, where they’re working through their expansion plans internally. (Source www.seekingalpha.com)

All it takes for a spiky catalyst is one or more clients going in for multi site solutions.  Can you visualize the catalyst?

Written by Michael Bigger. Follow me on Twitter and StockTwits.

Disclaimer: Bigger Capital, LLC, Bigger Capital Fund, LP, Bachelier, LLC and the Bigger family hold about 3% of Plug Power. We intend to increase our position if the company’s results track our benchmark.

Plug Power is a highly distressed situation and it is not suitable for the majority of investors. The likely outcome of an investment is a loss of principal.

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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