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. 

Comments

[mike lazar]

i see plug as the future of fork lift power and a whole lot of other applications like boats cars freezers trucks refrigeration units housing. and more. once it,s understood the value of fuel cells the markets will open wide up for these products. if anything the europeans will embrace plug powers products before anyone else. they seem to lead the way when it comes to alternative energies. right behind them china could benefit immensely from plug as they are in an environmental crisis of epic .

[Michael Bigger]

Mike,

Thank you for your comments. Europe is getting going now which is a bigger market than the USA for forklifts. The Air Liquide partnership will help Plug in a big way. We are as excited as you are but it will be a long journey. Can't wait to see how it evolves.