In January 2025, Plug Power (PLUG -4.57%) had just experienced a massive run, with shares hovering just below $3. I questioned whether investors should continue trusting the popular hydrogen stock. My assessment was damning.
"Some businesses aren't worth an investment at any price," I concluded. "For me, Plug Power meets this threshold."
My reasons were simple. On paper, hydrogen energy is very promising, especially when viewed as a climate solution. Most experts agree that hydrogen fuel use will rise over the coming decades, with demand especially from hard-to-decarbonize sectors such as aviation and steelmaking.
Image source: Getty Images.
The main issue is that, at least for now, hydrogen fuel remains largely more expensive than available alternatives, including traditional forms of renewable power like wind and solar, as well as conventional fossil fuels like natural gas. In other words, hydrogen fuel systems still rely on grants and subsidies to be economically viable. And in the long term, the prices of these systems must come down dramatically to spur adoption.
Has anything changed for the company over the last year and a half? You may be surprised by the answer.
NASDAQ: PLUG
Key Data Points
Here's how investors should view Plug Power stock today
My issue with Plug Power has never been its technology. Rather, I have long been concerned about the levels of shareholder dilution that must occur before the company can generate a profit.
"Hydrogen is an exciting industry to watch, but I'd stay away as an investor, even at today's discounted price," I warned over a year ago. "There's just too much risk that the company won't survive long-term. And even if it does, it'll come at a heavy price, like massive shareholder dilution."
Fast forward to today, and Plug Power shares remain well under $3 despite heavy volatility along the way. While its gross margin has improved, the company remains in the same difficult position. Yes, sales growth is strongly positive. But shareholder dilution is occurring at such a rapid pace that it remains hard for this underlying growth to offset heavy ongoing dilution. Over the past three years, Plug Power's shares outstanding have increased by 131%.
Plug Power appears to be succeeding in selling its GenEco hydrogen electrolyzers. And the company's new management team seems intent on controlling costs and executing on the company's sales pipeline. But even after reporting one of its most positive quarters in recent memory, the company still posted a $245.3 million loss last quarter, a figure that includes roughly $140 million in noncash charges.
I'm a big fan of hydrogen energy systems in general. And Plug Power seems to be gaining market traction for its new product lineup, with an improving gross margin to boot. But shareholder dilution over the decades has helped wipe out every run the stock has ever gone on. I expect shares to remain volatile. But I won't be jumping in until the company can prove that it can remain sustainably profitable, avoiding costly shareholder dilution to stay afloat.
