For years, hydrogen fuel cells held promise as a source of clean energy, but hydrogen power disappointed both fans and investors. The world just wasn't ready for it.
An enterprising outfit called Bloom Energy (BE +8.27%), however, has finally proven this renewable energy's underlying science can be the basis of a fiscally viable business. Specifically, in Q1 of this year, Bloom turned $751 million in solid oxide fuel cell revenue into non-GAAP (generally accepted accounting principles) per-share profit of $0.44, dramatically improving on its results a year earlier. Analysts expect more explosive top- and bottom-line growth going forward, too, assuming there's money to be made in the business.
The question is, can perpetually struggling, persistently unprofitable hydrogen outfit Plug Power (PLUG +1.02%) finally follow in Bloom Energy's footsteps?
It's certainly looking that way.
Image source: Getty Images.
The market's finally ready for Plug Power's solution ... probably
The science is simple enough -- passing hydrogen through an anode, a cathode, and an electrolyte membrane that make up a "fuel cell" produces electricity. The only by-products are water and heat, no pollutants.
This technology can be used in many ways, ranging from powering portable electronic devices to automobiles to buildings (yes, including AI data centers).
Plug Power's claim to fame? Forklifts, strangely enough, are typically used in industrial settings where the logistics of refueling hydrogen tanks can be handled. But the company can also meet larger-scale needs, including backup power for buildings and even utility companies. To this end, the industry's chief stumbling blocks have largely just been acceptance and the logistics and cost of raw hydrogen.
Bloom Energy, however, has finally pushed fuel cells into the mainstream as a source of electricity by designing and building its equipment from the ground up, largely to serve the energy-hungry AI data center industry.
Granted, it helped itself quite a bit, since its solid-oxide fuel cells can use hydrogen, natural gas, or biogas as fuel. Plug Power's tech is strictly limited to hydrogen.
In the same sense, Tesla paved the way for others to develop electric vehicles; the growing acceptance of Bloom's solutions is drawing attention to Plug Power's wares as well, giving it a shot at a hydrogen power market that will be worth $600 billion by 2035 (versus 2025's $280 billion), according to Precedence Research.
NASDAQ: PLUG
Key Data Points
Analysts think so anyway. While actual profitability is still years away, the analyst community collectively expects revenue to grow 15% this year, before accelerating to 18% next year, when lingering losses are expected to start shrinking. Most analysts also only rate PLUG shares a "hold" at this time, but their consensus price target of $3.69 that's 40% above the ticker's present price, at least acknowledges the fiscal progress that likely awaits is worth the risk that it doesn't.
Know what you're getting into
Don't dismiss that risk. Just because Bloom Energy's bottom-line growth is now soaring doesn't guarantee that Plug Power will do the same. Again, Plug Power's hydrogen fuel cell tech is limited compared to Bloom's.
To the extent the market's hesitance to accept hydrogen power was holding it back, however, Plug Power is becoming an interesting prospect for risk-tolerant investors.
