When fuel cell pioneer Plug Power (NASDAQ:PLUG) announced a blockbuster agreement to supply Amazon.com (NASDAQ:AMZN) with power systems for its warehouse forklifts last month, investors and analysts alike applauded the "transformative" deal. News that Amazon planned to buy $70 million worth of Plug Power product this year, perhaps twice that next year -- and that Amazon might further acquire 23% of Plug Power stock -- was so good for Plug, said FBR Capital, that its importance literally could not "be overstated."

But now one other analyst thinks the news is actually so bad for Plug Power that the danger to investors needs to be stated as well. Here are three things you need to know about that.

Wall painting of big fish about to swallow little fish.

Amazon.com could swallow Plug Power whole -- or it might just chew it up. Image source: Getty Images.

1. Initial euphoria

Investors in Plug Power initially applauded Plug Power's deal with Amazon, bidding Plug Power stock up 73% on the day it was announced.

Those shares would eventually more than double in price before beginning to fall back to Earth. And one of the big reasons that Plug Power stock did reverse course was that on May 9, the company reported earnings. Covering a period before the Amazon deal was announced, this report showed Plug booking Q1 revenue well below what Wall Street had predicted, while recording losses nearly twice as bad as Wall Street had feared.

On the plus side, Plug Power did reaffirm its guidance for the rest of this year. With Amazon expected to begin buying Plug power units in Q2 and thereafter, Plug confirmed that it expects to book $130 million in revenue this year and earn gross profit margins of between 8% and 12% on this revenue.

2. A captive supplier

Think about those numbers with me for a bit. Plug Power is saying it expects to record revenue of $130 million this year, and that Amazon will spend $70 million. This means that Amazon will account for more than half Plug's business this year. If Amazon doubles its purchases of fuel cells next year, at a minimum that should mean sales of $140 million to Amazon, sales of $60 million to everyone else (if all else remains equal), and therefore Amazon comprising 70% of Plug Power's business.

And yet, all else will not remain equal, says Roth Capital. This morning, investment banker Roth announced it is downgrading Plug Power stock to sell. And one of its reasons for doing so, as explained in a write-up on StreetInsider.com this morning, is that the more Plug Power begins to look like a captive supplier to Amazon, the less likely Amazon competitors will be to patronize Plug Power. Already, Roth says it expects Wal-Mart (NYSE:WMT) to "dramatically reduce" purchases of Plug Power products this year.

That's a big blow for Plug Power, which according to its latest 10-K filing with the SEC, derived more than 34% of its $85 million in 2016 revenue from Wal-Mart.

3. Plug Power's good news is very bad news

What would losing Wal-Mart's business do to Plug Power? As Plug admits in its own 10-K, "a loss or decline in business with [Wal-Mart] could have an adverse impact on our business, financial condition and results of operations."

I'll say. Last year, Wal-Mart bought $29 million worth of product from Plug. Remove that revenue from the equation, and next year it's conceivable that Plug Power's revenue could look like this: $140 million from Amazon, $31 million from everyone else -- and presto change-o, suddenly, Amazon.com accounts for 82% of Plug Power's business.

If that's the way things play out, Amazon may never need to buy the 23% of Plug Power's stock that it's entitled to acquire through the terms of last month's contract. Comprising fourth-fifths of Plug Power's business, Amazon would be able to essentially dictate terms to its supplier, and acquire Plug's products at whatever price it wanted to pay -- no matter how unprofitable this might be for Plug.

Summing up: What it all means for investors

Reading all these tea leaves, Roth Capital has come to the conclusion that far from being "additive" for Plug, the Amazon contract has the potential to be "dilutive" to Plug Power's earnings going forward. Between the "obvious customer attrition" that is now coming to light, and the "poor quality of revenue, earnings, and gross margins" that Roth expects to see "going forward," Roth recommends that investors sell Plug Power stock now -- before the stock plunges to its new price target of $1.30 per share.

In light of this warning, and my own long-held reservations about Plug Power stock, I'm inclined to agree with that assessment.

Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.