Plug Power (PLUG 1.26%) shares have soared more than 50% over the last three weeks. Those gains would have been even higher had it not been for a big drop this week. As of early Friday morning, Plug stock is down 10% since last Friday's close, according to data provided by S&P Global Market Intelligence.

Green hydrogen generation network

Cash and cash equivalents have dropped from about $690 million at the end of 2022 to just about $110 million on Sept. 30, 2023. That's due to delays in building its hydrogen production facilities causing it to purchase a higher-priced product to fulfill its customer agreements.

In its third-quarter report, in November, Plug explained it, saying: "Service costs have been affected as hydrogen disruptions have delayed the roll out of upgrades at both new and existing customer sites. These factors have been compounded by certain cost increases from inflation impacts on labor, materials and overhead."

Profitability still isn't in sight

Investors drove shares higher recently when the company announced it finally began shipments from its new Georgia production facility. But one analyst thinks that optimism is premature.

This week Seaport Research analyst Tom Curran downgraded the stock after its recent surge. Curran places the equivalent of a hold rating on Plug, lowered from a buy recommendation. In a research note shared by Barron's, the analyst commented, "We see balanced risk-reward at this valuation while Plug seeks to raise the requisite capital, stanch cash burn, and improve margins."

One reason for the recovery in Plug shares over the past several weeks was a comment by Plug CEO Andy Marsh in an interview indicating that a previously announced agreement to potentially issue $1 billion in common stock may not be needed.

But with the Federal Reserve indicating that it may be taking a "higher for longer" approach to interest rates before beginning a cycle of rate cuts, borrowing costs will remain high for companies like Plug Power. If the company does issue that $1 billion in stock to raise fresh capital, the stock likely will give back much of its recent gains. That's what drove this week's decline and should be a warning to investors that it's still too early to buy into Plug Power shares.