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Plug Power Inc Shares Double -- Should Investors Buy Into the Hype?

By Motley Fool Staff - Apr 12, 2017 at 6:22AM

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The stock’s rise was powered by a major deal with the leading name in e-commerce.

In this segment from Motley Fool Money, Chris Hill and Simon Erickson break down the phenomenal gains Plug Power (PLUG 1.35%) enjoyed last week after the company announced the details of a deal with Amazon, which could total $600 million over the next few years. That would effectively double current revenue in one fell swoop.

A full transcript follows the video.

This video was recorded on April 7, 2017.

Chris Hill: One of best performing stocks on the NASDAQ this week is Plug Power. Shares of the fuel cell company rose more than 50% after Plug Power announced a deal with Amazon that could reach $600 million over the next few years. That's pretty incredible if that happens, Simon, because Plug Power's market cap isn't even $600 million.

Simon Erickson: It essentially doubled their annual revenue just in working with Amazon for this one deal. They're big game hunting. Everyone knows Amazon -- for reference, by the way, Plug Power is making hydrogen fuel cells, you're going to be using these in the forklifts Amazon will be using in their warehouses across the country, replacing battery powered forklifts. So, they're more environmentally friendly, a lot of people like that they're more efficient than batteries. So if you're a short-term trader, this is your dream come true. This is a micro cap that pops on the news of a big customer that everybody knows who they are. But still, in the back of my mind, I have to go on record and say that the economics still suck.

Hill: For Plug Power?

Erickson: Yes. This is a business that, we saw the same thing back in February 2014, they signed a deal with Wal-Mart, same kind of specific, stock popped to about $9 a share. Every year since then, the company has still lost in net earnings. Negative net earnings. Negative operating earnings and negative cash flow every year since then. It's still only at about 75% down from its highs back then. I'm seeing another story play out here. They have to figure out and demonstrate that they can make money in this business before I'm going to buy into the hype.

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