The hydrogen market is going to be huge -- but right now, it isn't growing very fast. In 2023, global hydrogen demand reached 97 million metric tons, and it grew to just 100 million metric tons in 2024. Due to changes in the global energy landscape, however, some estimates assert that demand will reach 600 million metric tons by 2050.
Companies like Plug Power (PLUG -3.68%) that make hydrogen energy systems are poised to benefit directly from this growth. But does that make the stock a buy today?
Will Plug Power's stock price benefit from rising hydrogen fuel demand?
Plug Power is already benefiting from rising interest in hydrogen fuel systems. Over the past five years, its revenue has grown by 118%. Its stock price over that time period, however, has fallen by nearly 90%. Why the mismatch? Just take a look at Plug Power's financials.
Over the past five years, Plug Power has consistently maintained negative gross margins, meaning it was unable to turn a profit on the systems it sells. Its bottom line has consistently been in the red. So to keep the business financially afloat, Plug Power has repeatedly issued huge blocks of new stock. Since the end of 2020, the total number of shares outstanding has increased by more than 200%. So while revenue has grown impressively, each share of stock now commands a significantly smaller share of the total revenue pie.
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This has long been an issue for Plug Power. Since going public in 1999, the company has never been unable to maintain positive profit margins. And while the hydrogen fuel market's growth should be large over the next few decades, the transition likely won't be fast enough to suddenly pull Plug Power into profitability in the near term. That means additional secondary share sales are on the way -- a strong indicator that the stock is not a buy today, despite the otherwise intriguing business.
