Plug Power's (PLUG +2.58%) hydrogen fuel cell solutions could help usher in a newer, cleaner, sustainable energy source. With some estimates projecting that the green hydrogen energy market could grow to $30 billion by 2030, Plug Power's long-term opportunity is huge.
However, despite being a leading hydrogen energy stock, the company has struggled mightily over the past several years. The stock recently peaked in 2021 at around $75 per share, but since then, it has plummeted 97%.
Plug Power, priced under $2.50 per share, may appear to be cheap, but there are some things you'll want to know before scooping up this energy company.
NASDAQ: PLUG
Key Data Points
Green hydrogen has massive long-term potential
Plug Power is a top player in the hydrogen energy industry and was one of the first to create a commercially viable market for its hydrogen fuel cell technology. Its technology uses hydrogen and oxygen to produce electricity without combustion and is used in material-handling vehicles (forklifts), stationary power stations (generators), and electric delivery vans. Some of its top customers include Amazon and Walmart.
The company is working toward building an end-to-end hydrogen ecosystem, including producing, storing, transporting, and dispensing liquid green hydrogen. Earlier this year, it began producing liquid hydrogen at its production facility in Georgia.
Plug Power is looking to capitalize on a massive long-term growth opportunity. A recent report published by Markets and Markets Research says the green hydrogen market could be worth $30.6 billion by 2030. This would represent a staggering 61% compound annual growth rate over the next several years.
Plug Power continues to bleed cash
Although the long-term market potential of green hydrogen is vast, it comes at a significant cost for Plug Power, which continually loses money year in and year out. Despite being a publicly traded company for a quarter of a century, it has never produced a full-year net profit.
PLUG Revenue (TTM) data by YCharts.
Not only that, but despite growing revenue, its losses have grown larger. Over the past 12 months, Plug Power brought in $684 million in revenue, but lost a staggering $1.5 billion.
This begs another question for investors: If Plug Power isn't making money, how is it still in business? The answer is primarily through shareholder dilution. Plug Power has consistently turned to equity markets to raise capital to help fund its operations.
Over the last decade, Plug Power's average diluted shares outstanding have gone from 170 million to 737 million. In other words, one share is worth less than a quarter of its original stake from dilution alone.
PLUG Average Diluted Shares Outstanding (Quarterly) data by YCharts.
What's next for Plug Power?
For Plug Power to be a more appealing investment, the company must start making a profit. However, its recent earnings don't show signs of a turnaround soon. In the second quarter, the company made $143 million in revenue, well below analysts' expectations of $185 million.
Not only that, but the company projects 2024 revenue of between $825 million and $925 million, with the midpoint of this estimate below consensus estimates of $908 million.
The company is taking steps to reduce its cash burn, improve its margins, and bolster its balance sheet. During Q2, the company reduced its net cash used in operations plus capital expenditures by 30% and will look to continue to curb expenses in the second half.
It recently hired Dean Fullerton as its new Chief Operating Officer (COO) to help with these initiatives. Fullerton comes over from Amazon, where he oversaw engineering services for the e-commerce giant across North America, Europe, and emerging companies. Plug Power is hopeful that Fullerton can help it improve its operational efficiencies across its supply chain.
Is it a buy?
Plug Power has a plan in place, and investors will want to pay close attention to its earnings and management's guidance over the next several quarters. While the company continues to burn cash, it's saying the right things about becoming more efficient, slowing its cash burn and turning toward making its businesses more profitable.
With that said, it's a company that has yet to turn a profit in its entire history, and it has significantly diluted its shareholders in the process. So, while the long-term opportunity in green hydrogen is massive, I want to see Plug Power make significant progress on its margins and bottom line before considering an investment in the green energy company.
