Plug Power (PLUG +9.83%) has gotten crushed in recent months due to liquidity concerns. The hydrogen stock has plunged nearly 80% over the past year as investors started fretting about how the money-losing company would fund its operations and bold expansion plans. Last fall, it issued a stark warning stating it was "projecting that its existing cash and available for sale and equity securities will not be sufficient to fund its operations through the next twelve months."
However, Plug Power has since unveiled plans to raise $1 billion in equity capital through an at-the-market (ATM) program. It's also finalizing a term sheet with the Department of Energy (DOE) for a $1.6 billion loan facility. These moves should help shore up its liquidity. Here's a look at whether they make the hydrogen stock a buy.
NASDAQ: PLUG
Key Data Points
Funding almost secured
Plug Power has taken two important steps to shore up its liquidity. It aims to tap the equity markets to raise up to $1 billion in equity over the coming months through an ATM program. That will enable it to sell shares when it needs cash to fund its operations and capital projects. This approach of issuing shares over time (instead of all at once) could help mute the dilutive impact of the sales. If the company sold all that stock in one block sale, it would increase its outstanding shares by a whopping 60%. The hope is that Plug Power can sell more stock in weeks when it's rallying to reduce the total number of shares issued.
However, it might not need to issue that much stock in the future. Plug Power recently revealed that it's finalizing a term sheet with the DOE for a $1.6 billion loan facility. CEO Andrew Marsh commented on this loan during a recent call with investors. He stated, "This funding, when received, will support the development, construction, and ownership of up to six hydrogen production facilities, significantly advancing green hydrogen deployment in the United States."
That's a significant amount of funding. According to Wall Street analysts, the company will use about $1.5 billion in cash over the next two years to fund its operations and build out its hydrogen network. Once that heavy investment phase is complete, Plug Power should start generating positive free cash flow. It hopes to reach that inflection point around 2026 or 2027. The company seems to have plugged the hole in its liquidity with its existing resources, the government loan, and potential future ATM issuances.
More good news
Securing additional funding wasn't the only recent good news for Plug Power. The company also announced that it started operations at its Georgia plant, the country's largest liquid green hydrogen plant. The plant will have the capacity to produce 15 tons of liquid electrolytic hydrogen per day. That's enough to power 15,000 forklifts each day.
Completing this plant is a major milestone for Plug Power. It will boost the company's green hydrogen production and revenue. It will also enhance its scale, which should help reduce costs.
Building hydrogen plants like this one is a key aspect of Plug Power's growth strategy. The company believes its investment to expand its capacity can grow its revenue from $1.2 billion last year to $6 billion by 2027 and $20 billion by 2030. That rapidly rising revenue should increase its scale and reduce costs, putting the company on the road to generating positive cash flow and profitability.
However, Plug Power still has a long road ahead before it reaches that point. It must execute its expansion strategy while ensuring it has the liquidity to continue operating and investing in its projects. While its recent moves to bolster its liquidity will help, Plug Power is looking for more strategic equity partners to help fund some of its projects. Securing additional strategic partners would be another important step in its path toward building out a leading hydrogen network because it would reduce the amount of stock it would need to sell through its ATM program.
A high-risk, high-reward hydrogen stock
Plug Power has an ambitious plan to build significant hydrogen production capacity over the next several years to supply the economy with more low-carbon energy. That strategy could fuel monster revenue growth over the coming years.
However, the company doesn't yet have all the funding in hand. As a result, there's still significant risk. It might need to sell a lot of stock to finance its growth, which could continue to weigh on its share price. So while the company has a lot of promise, it's still too risky for most investors to buy right now.
