Plug Power (PLUG 4.13%) shares have had a wild ride over the years. Since going public in 1999, the hydrogen stock has lost around 98% of its original value. Over the past 12 months, however, shares have surged by more than 380%.
The truth is that Plug Power isn't the company it was in decades past. Today, the company is a bona fide climate change stock, with rising global regulatory tailwinds making its hydrogen fuel systems more economically viable. According to one industry report, "clean hydrogen will grow 100-fold from today ... by 2060."
The hydrogen industry growing 100-fold by 2060 provides a long-term foundation of growth for Plug Power despite its relatively paltry $5 billion market cap. Before you jump in, however, there is one key risk to keep in mind.
NASDAQ: PLUG
Key Data Points
Two reasons to avoid Plug Power stock despite promising industry growth
In 2024, a Hydrogen Council industry report observed that investment in hydrogen projects had grown by more than 600% over the trailing-four-year period. "While the global project pipeline has grown by a factor of seven since 2020 from 228 projects in 2021 to 1,572 projects in 2024 across the value chain, it has also matured," the industry group highlighted. "Over the years, a larger portion of projects have shifted from announcements to more advanced stages. Between 2020 and 2024, investments made in front end engineering design (FEED) stage projects increased by [a] factor [of] 20."
In combination, these statistics paint a promising picture for hydrogen, as well as Plug Power, which designs and sells hydrogen fuel systems. Not only is investment in the technology ramping up quickly, but massive industry growth is expected over the next three decades and beyond.
But there are two problems that should mitigate optimism.
Image source: Getty Images.
First, industry forecasts have been wrong in the past. Global consulting group McKinsey & Co., for example, has lowered its forecasts many times in recent years and now predicts hydrogen demand will grow by just twofold to fourfold by 2050 -- far below other industry forecasts like the one I cited that calls for 100-fold growth by 2060.
Second, much of this growth will be backloaded. That is, growth will be minimal in the first decade, building to higher growth rates decades down the line. That's bad news for the likes of Plug Power, which is still struggling to reach profitability. To plug the cash-flow gap, Plug Power has needed to sell massive amounts of stock in recent years, resulting in mounting shareholder dilution. So while Plug Power may succeed as a business long term, shareholders may see most of their theoretical gains offset by this dilution.
