Plug Power (PLUG 0.32%) has been in freefall in recent months, with the hydrogen stock losing another 23.9% value in August, according to data provided by S&P Global Market Intelligence. Plug Power stock is now down a whopping 40% in just three months. What's going on here, and is there any hope left for investors?
Plug Power's biggest problems
Plug Power might be a frontrunner in green hydrogen, but the company is incurring huge losses, burning cash rapidly, and running short of cash. Investors expected some respite from the company's second-quarter earnings report, but that was not to be. In fact, the company's sales are also dwindling.
In early August, Plug Power reported a massive 45% year-over-year drop in its revenue to $143 million for the second quarter. Worse yet, it incurred a net loss of $262 million on that revenue, which again was up about 11% year over year. Plug Power also ended the quarter with cash and equivalents of only $62 million versus $135 million as of Dec. 31, 2023.
Because of the dire state of its cash flows and balance sheet, Plug Power has consistently sold shares to raise funds, including in the last quarter, and that has diluted existing shareholders' wealth further and eroded the stock price.
NASDAQ: PLUG
Key Data Points
Not surprisingly, several analysts rushed to downgrade their price targets on Plug Power stock last month after a dismal earnings report, further adding to the selling pressure on the stock.
Why Plug Power stock keeps falling
Plug Power tried hard to convince investors about its growth prospects by insisting that the company is at an inflection point as it installs more electrolyzers, expands sales, cuts costs, and reduces its cash burn over the second half of 2024. Management also insisted it is working closely with the Department of Energy (DOE) to secure a loan of $1.66 billion that should help Plug Power fund the construction and development of up to six hydrogen plants.
Plug Power stock rallied after securing a term sheet from the DOE earlier this year, but the enthusiasm faded, and investors aren't willing to bet more on the company's technology until it can prove its profitability. That seems like a tall order, given Plug Power's low sales growth and high costs. To put some numbers to that, Plug Power expects to generate only $825 million to $925 million in revenue this year versus $891 million in 2023, which similarly fell hugely short of its earlier 2023 revenue guidance of $1.2 billion to $1.4 billion.
