Plug Power (PLUG +0.00%), a leading developer of hydrogen charging technologies, has been a disappointing investment over the past year. After reaching a 52-week high of $3.34 per share on July 16, 2024, it declined nearly 60% to its current price of about $1.50.
Should you buy Plug's stock after that pullback, or will it sink even lower?
What does Plug Power do?
When Plug Power went public in 1999, it planned to develop hydrogen fuel charging systems for homes. But high production costs, soft consumer demand, the difficulty of building new hydrogen charging infrastructure, and high regulatory hurdles shattered that dream.
Image source: Getty Images.
Plug Power subsequently pivoted toward the development of hydrogen fuel cells and charging systems for warehouse forklifts and backup power systems. Amazon (AMZN +2.05%) and Walmart (WMT 1.83%), which both recognized the cost-cutting potential of those systems, became Plug's two biggest customers and investors (through their stock warrants). Plug Power also expanded its smaller cryogenic equipment business with two acquisitions over the past three years. It's now the single largest buyer of liquid hydrogen, and it has already deployed more than 70,000 fuel cell systems and over 250 fueling stations across the world.
Therefore, Plug Power is well-positioned to profit from the potential growth of the hydrogen charging market. But 26 years after its public debut, hydrogen charging hasn't gone mainstream. The same challenges that prevented Plug's residential business from taking off are still holding back the nascent market.
What happened to Plug Power over the past few years?
In 2020, Plug Power's revenue turned negative as the usage of its own stock warrants to subsidize its fuel cell sales to Amazon and Walmart surpassed its own customer payments. But after restating its financials, its revenue turned positive again in 2021 and rose through 2023.
|
Metric |
2021 |
2022 |
2023 |
2024 |
|---|---|---|---|---|
|
Revenue |
$502 million |
$701 million |
$891 million |
$629 million |
|
Growth (Loss) |
N/A* |
40% |
27% |
(29%) |
|
Operating Margin |
(87%) |
(97%) |
(151%) |
(321%) |
|
Net Income (Loss) |
($460 million) |
($724 million) |
($1.37 billion) |
($2.10 billion) |
Data source: Plug Power. *Figure is not applicable due to financial restatements.
However, most of Plug Power's growth in 2022 and 2023 was driven by its aforementioned acquisitions instead of the organic growth of its fuel cell and charging systems business -- which struggled as the macro headwinds drove businesses to rein in their spending on big hydrogen projects.
In 2024, Plug's slowdown intensified as it lapped its acquisitions. Its operating expenses also surged, and its losses widened at an alarming rate. But in 2025, analysts expect its revenue to rise 17% to $734 million as it posts a net profit of $233 million. In 2025, they expect its revenue to increase 39% to $1.02 billion as its net income more than doubles to $478 million. With a market cap of $1.3 billion, it looks dirt cheap at 1.3 times next year's sales. However, its growth will only accelerate if a few catalysts kick in.
What catalysts will drive Plug Power's recovery?
First, declining interest rates should drive more businesses to resume their hydrogen plans. That growth should be supported by the production of green hydrogen at its new plant in Georgia, as well as a new joint venture with chemical manufacturing company Olin (OLN +1.94%) in Louisiana to scale its production volume and dilute its unit costs.
The company also secured a $1.66 billion loan guarantee from the U.S. Department of Energy (DOE) this January to fund its construction of six green hydrogen manufacturing plants, and the Senate's latest revision of the Trump administration's proposed tax bill will grant a two-year extension for tax credits for the hydrogen industry. That support should keep Plug Power solvent as it aggressively scales up its business.
To boost its profitability, Plug Power is implementing an aggressive cost-cutting plan dubbed "Project Quantum Leap" to reduce its annual expenditures by $150 million-$200 million through workforce reductions, lower discretionary spending, and other capital efficiency initiatives.
NASDAQ: PLUG
Key Data Points
Should you buy Plug Power's stock while it's below $3?
Plug Power's future looks a lot brighter than it did a year ago. That's probably why insiders bought nearly 12 times as many shares as they sold over the past 12 months. They also bought about 11 times as many shares as they sold over the past three months.
However, investors should note that Plug Power more than tripled its number of shares over the past five years with its secondary offerings and stock-based compensation. That dilution should persist for the foreseeable future, and it could be exacerbated by Amazon and Walmart exercising their stock warrants (which would force Plug to issue more shares).
But despite that dilution, Plug Power might be an attractive play at these levels if you expect the hydrogen market to finally turn mainstream. It disappointed a lot of investors over the past 26 years, but its long-term tailwinds are finally picking up -- and it might generate big multibagger gains over the next decade as the hydrogen market expands.
