Plug Power (NASDAQ:PLUG) stock is 57% off its high price of more than $73 this year. However, it is up nearly 22% so far in October compared to a 3.8% rise in the S&P 500 index. Some recent developments have investors charged up once again for the fuel cell maker's stock. Let's take a closer look at Plug Power's recent performance and its growth prospects.

Tapping the green hydrogen market

Plug Power has a long history of incurring losses. The company has primarily been focused on its materials handling business and hasn't been able to turn that profitable so far. It now seems to be aiming to change that. Plug Power recently announced its financial targets for 2025. These differ in some important ways from its previously announced targets for 2024. The first major point is Plug Power's increased focus on the green hydrogen market.

In its September 2020 update, Plug Power provided a gross billings target of $1.2 billion for 2024. It expected just $200 million of this coming from its green hydrogen business. However, in its update last week, Plug Power estimated $1.5 billion in revenue coming solely from green hydrogen business by 2025. That's more than seven times the company's 2024 revenue estimate from this market.

A parked car with a nozzle labeled H2 in the gas cap.

Image source: Getty Images.

Plug Power expects to generate $3 billion in total gross billings in 2025. A lesser fraction of total revenue coming from materials handling could be taken as a positive, as that business hasn't been profitable so far for the company. However, it is important to note that how Plug Power fares in the green hydrogen business remains to be seen.

The second notable thing in Plug Power's latest update is that it expects to generate more than 17% operating margin in 2025. In the absence of any other detail, there seems to be a delay in achieving that target, as Plug Power previously expected to achieve 17% operating income in 2024. Plug Power doesn't have a reliable track record of achieving its expectations, and has missed on its targets several times in the past.

Limited growth in the electric vehicles segment

Another new area where Plug Power is trying to expand is the fuel cell electric vehicles segment. FCEVs have seen improved sales in 2021. Around 9,000 FCEVs were sold globally in the first half of 2021. By comparison, only 10,000 FCEVs were sold in the entire year in 2020. Hyundai Motor and Toyota are the top players in the FCEV segment, controlling more than 90% of the global market. Notably, both of these companies develop their own fuel cells. So, Plug Power faces significant competition in this market.

It has partnered with Renault to target a 30% share of Europe's fuel-cell powered light commercial vehicle (LCV) market.  The two companies expect 500,000 FCEVs in Europe by 2030. Notably, there were less than 3,000 FCEVs (including LCVs and heavy-duty) in use in Europe at the end of 2020. So, 30% of Europe's fuel-cell powered LCV market isn't a huge number right now. 

Some major automakers, including Tesla and Volkswagen, believe FCEVs may see very limited growth in the future. So, Plug Power isn't in a very strong position right now in the FCEV business, and it could be a challenging segment for it in the future, too.

Recent partnerships

Plug Power announced two partnerships in October. It has partnered with Phillips 66 to advance use of hydrogen in the industrial and mobility sector and to develop hydrogen infrastructure to support growth. Plug Power has also partnered with Airbus to focus on opportunities in ground support equipment at airports as well as in hydrogen-powered aircraft. Plug Power is already working with Universal Hydrogen, Airflow, and Heven Drones to research and advance the use of fuel cells in aviation.

A long way to go

Plug Power is operating in a very interesting hydrogen market, which could be huge in the long term. Specifically, hydrogen looks like a promising option to decarbonize the heavy-duty vehicles, marine, and aviation segments. However, there are several unknowns, and it will take many more years before hydrogen becomes a truly viable option. Moreover, alternative fuel and storage options may limit the adoption of hydrogen fuel cells.

Plug Power has been incurring losses for two decades and the company's offerings continue to evolve. It hopes to achieve a positive operating margin by 2025, and a positive net income could still be some more years beyond that.

Based on Plug Power's latest quarter revenue of $125 million, its price-to-sales ratio comes to around 36 times. Even based on the expected 2025 sales, the ratio comes to around six times. Overall, buying Plug Power stock at six times its projected sales four years down the line, with no profits in sight, doesn't look enticing to me right now. You might want to look elsewhere for opportunities that could make you rich.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.