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Why Plug Power Inc's Shares Popped Last Month

By Travis Hoium – Mar 11, 2016 at 7:40AM

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Will a new production expansion be fuel for Plug Power Inc's business in 2016?

Image source: Plug Power.

What: Shares of Plug Power Inc (PLUG -5.18%) jumped 11% in February after the company announced a major production expansion.

So what: Management added a second shift at its Latham, NY factory, which it said will allow the company to double production. This is expected to also reduce overtime and long-term costs for the company as it moves toward a goal of breakeven by the end of 2016.  

However, this isn't all great news for Plug Power. The company still needs more funding, and it recently agreed to a $30 million term loan facility with a 12% interest rate, which is incredibly high no matter how you slice it.  

Now what: Plug Power's shares are still up and down depending on the mood of the market, and the company hasn't yet reached its stride operationally. We simply don't know if it will be able to break even by the end of the year, or whether it will be able to continue growth in the future.

I'm bullish on the long-term potential for fuel cells, but until we see if Plug Power can make money, this is a high-risk stock that I can't recommend in good conscience. Debt investors, too, see that risks abound: hence the 12% interest rate on its newly issued debt.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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