Buy Better: Plug Power vs. ChargePoint

Power outlet (NASDAQ: PLUG) and Charging point (NYSE: CHPT) they are both green energy stocks that have produced ugly losses for most of their investors.

Plug Power, which was once considered a promising play in the hydrogen fuel cell market when it went public in 1999, has fallen nearly 99% from its IPO price. ChargePoint, a leading manufacturer of charging networks for electric vehicles, has lost more than 90% of its value since going public through a merger with a special purpose acquisition company (SPAC) in 2021.

Could any of these unloved stocks go green again?

Plug Power’s niche market is not growing

Plug Power originally developed residential hydrogen-powered systems. But it currently costs more to produce hydrogen than to use existing fossil fuels, and it is more expensive to build new hydrogen charging infrastructure than to expand existing power grids.

Plug eventually abandoned that plan and turned to a niche market of hydrogen-powered forklifts for warehouses and fulfillment centers. He won Amazon and Walmart as top customers, subsidizing its fuel cell sales with stock guarantees — or options to buy more of its own stock at a discount — but those incentives exceeded the total amount paid by customers through 2020. This issue caused Plug Power’s reported earnings to turn negative in 2020.

Data source: Plug Power.

Plug Power’s revenue turned positive again in 2021 and grew over the next two years, but much of that growth was fueled by two acquisitions that expanded its cryogenic equipment business. This inorganic growth offset weakness in its core hydrogen fuel cell business, but caused its operating and net losses to widen at an alarming rate.

Plug Power had just $62 million in cash and cash equivalents at the end of the second quarter of 2024, but secured a new $1.66 billion loan from the US Department of Energy (DOE) in May to build up to six new hydrogen green energy production units. In the U.S. That lifeline will keep Plug Power’s business alive, but it will also double its total debt to $3.45 billion and raise its debt-to-equity ratio to 1.2.

For the full year, analysts expect Plug Power’s revenue to fall 5% to $843 million as it narrows its net loss slightly to $905 million. Its $2.5 billion enterprise value might seem like a bargain at three times this year’s sales, but it could continue to trade at that discount if the ice-cold hydrogen market doesn’t heat up again.

The story continues

ChargePoint is facing an existential crisis

ChargePoint builds electric vehicle charging stations for homes, businesses looking to attract more drivers, and companies that operate fleets of electric vehicles. It has already built over a million charging points in North America and Europe.

But like Plug Power, ChargePoint has faced slowing sales growth and steep losses over the past few fiscal years (which ended in January of each calendar year). This deceleration was caused by the broader EV market slowdown, headwinds for its commercial customers and intense competition from adzehis (NASDAQ:TSLA) expanding network of smaller Superchargers and challengers such as Intermittent charging (NASDAQ: BLNK).

Data source: ChargePoint.

Tesla’s Level 3 chargers are faster than ChargePoint’s Level 2 chargers and are now compatible with a growing list of third-party electric vehicles. This pressure could accelerate ChargePoint’s long-term growth and prevent it from breaking even.

For the full year, analysts expect ChargePoint’s revenue to fall 12% to $448 million as it narrows its net loss to $259 million. However, that bottom line improvement is driven by its recent layoffs — so it’s actually shrinking its core business as it faces tougher competitive threats. It ended its most recent quarter with just $243 million in cash and cash equivalents, and its high debt-to-equity ratio of 3.3 doesn’t give it much room to raise fresh cash at reasonable rates. Its enterprise value of $702 million might seem cheap at less than twice this year’s sales, but it could be worth that big discount.

Buy better: Plug Power

I wouldn’t touch any of these downed green energy stocks right now. But if I had to choose one over the other, I’d buy Plug Power for three reasons: it faces fewer direct competitors in its niche market; is less influenced; and is further supported by Amazon, Walmart and the US government. ChargePoint has established a lead for the electric vehicle charging network market, but it could be overtaken by Tesla and other competitors in the next few years.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Tesla and Walmart. The Motley Fool has a disclosure policy.

Better Buy: Plug Power vs ChargePoint was originally published by The Motley Fool