Plug Power (PLUG +0.17%) has an exciting backstory, but the facts on the ground for investors are less sanguine. There's a reason its stock price has fallen more than 95% from the all-time highs it hit in 2021. But is that drop an opportunity, or is it just a realistic reflection of the risk that investors face if they buy Plug Power stock?
What does Plug Power do?
Plug Power is a clean-energy stock, working in the hydrogen niche of the broader energy sector. Hydrogen is clean because using it as a fuel produces two main by-products: heat and water. The heat is used to create power, and the water is, well, a life necessity. In certain cases, producing water and not noxious fumes is a huge positive. Think forklifts inside of a warehouse.
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Hydrogen is also used for other things, including transportation. There's just one problem from a broader perspective: Hydrogen is a relatively expensive fuel compared to other alternatives, like gasoline and diesel.
That's buttressed by the fact that there isn't a material infrastructure in place to support hydrogen, particularly compared to the infrastructure that has been built around oil and natural gas.
Plug Power is trying to change all that, as it looks to build its business across the hydrogen value chain. It is an interesting story at a time when clean and renewable energy is slowly starting to displace dirtier fuel options.
But even there, hydrogen is at a disadvantage. The solar and wind markets, for example, are far more developed than the hydrogen market. Basically, Plug Power has its work cut out for it.
Plug Power's results aren't great
The stock has cratered, at least partly because of those facts. But just as important, the financial results haven't been all that impressive. To be fair, it is still just a start-up business, so this isn't surprising, per se. However, that doesn't change the fact that Plug Power is a small, money-losing business trying to take on entrenched energy technologies backed by financially strong competitors.
For example, in the second quarter of 2025, revenue rose 21% year over year, but it still lost $0.20 per share. Its gross margin was negative 31%, which was pitched as a positive achievement. And it was, given that the gross margin a year ago was negative 92%. The company's goal is to break even on gross margin in the fourth quarter of 2025.
NASDAQ: PLUG
Key Data Points
That's nice, but there's still a long way to go before Plug Power has a profit on the bottom of its income statement. A positive gross margin just means that the company's revenue covered its cost of revenue. There are added costs below the gross-margin line, like research and development (R&D) and selling, general, and administrative (SG&A) costs, among others.
R&D is vital for a company that is trying to build a new technology platform for the world. And SG&A is simply the cost of operating the company, which isn't optional, either. Achieving a gross profit is good, but it isn't the finish line.
Plug Power remains a high-risk investment
Trading hands at less than $2 per share, Plug Power's stock is cheap. But cheap doesn't always mean there's a buying opportunity. Sometimes a cheap price is an indication of the risk involved in the investment. That appears to be the case for Plug Power, which, as a fairly young business, doesn't have a strong earnings record behind it.
Could buying Plug Power be a huge win for aggressive investors? Sure! But a lot has to go right, and you should only buy it if you can stomach the inherent risks involved.
