Contemplating an investment in Plug Power while its share price remains under the $3 threshold?
Contemplating an investment in Plug Power while its share price remains under the $3 threshold?
Plug Power (PLUG decreasing by 0.82%) is on a mission to supply sustainable and pure energy utilizing its advanced hydrogen fuel cells. As suggested by consultants at Deloitte, the market for green hydrogen could amplify to an astonishing $1.4 trillion by 2050, providing Plug Power immense potential for growth.
However, the eco-friendly energy company has encountered several obstacles over the past few years. Post reaching a peak of around $75 per share in 2021, the stock has plummeted an astounding 97% as it grapples with business challenges and a constantly shifting environment.
Plug Power might seem like a bargain due to its share price substantially decreasing and trading below $3 per share. However, before investing in the company, there are some factors to take into account first.
Plug Power's green hydrogen platform is expanding
Plug Power specializes in developing hydrogen fuel cells, aiming to establish a commercially viable market for this cutting-edge technology. Their goal is to construct a comprehensive hydrogen ecosystem, incorporating the production, storage, transport, and dispensing of liquid green hydrogen.
Relying on hydrogen and oxygen, Plug Power's groundbreaking fuel cell technology generates clean electricity without combustion. This technology powers material-handling vehicles like forklifts, stationary power stations (generators), and electric delivery vans. Some of its most renowned customers include Amazon and Walmart.
Last year, Plug Power inaugurated a 350,000-square-foot fuel cell manufacturing facility in New York, aiming to fulfill the growing demand for its fuel cells. In the early months of this year, it initiated the production of liquid hydrogen at its hydrogen production facility in Georgia, and plans to establish additional plants in New York, Louisiana, and Texas.
Sluggish growth and mounting losses have hindered the stock
Plug Power's revenue growth was robust; income increased by 27% last year to $891 million. However, this growth has halted over the past year. Through three quarters of 2024, Plug Power's revenue was $437 million, a 35% decrease compared to the same period the previous year.
The company has been grappling with slowing sales of its hydrogen infrastructure. This year, the company had 11 hydrogen site installations compared to 41 last year, as the hydrogen economy has developed at a slower pace than anticipated.
These decreasing sales coincide with the company continuing to lose money. Through September 30, Plug Power has incurred an operating loss of $720 million, a slight increase from its loss of $718 million through the same period last year. Over the past 12 months, the company has lost nearly $1.5 billion.
What's next for Plug Power?
Plug Power is implementing strategies to improve its profit margins and decrease its cash burn rate. Early this year, it hired Dean Fullerton as its new COO. Fullerton oversaw engineering services for Amazon across North America, Europe, and emerging countries and will look to enhance operational efficiencies throughout Plug Power's supply chain.
It recently reported third-quarter revenue of around $174 million, significantly lower than analysts' expectations of $210 million.
Its projections for the remainder of this year and the upcoming year were also unimpressive. The company predicted lower growth for the upcoming year, stating that it expects revenue to be between $850 million and $950 million, below analysts' estimates of $1.18 billion.
Is it a buy?
The long-term market potential for green hydrogen could be substantial. However, Plug Power has its work cut out for it as it traverses challenging times for the industry and strives to grow while also reducing its cash burn rate.
Plug Power has diluted shareholders for several years to fund its money-losing business. Over the past 10 years, Plug Power's outstanding shares have increased from 173 million to almost 880 million. Essentially, one share is worth 80% less due to dilution alone.
Although the long-term opportunity in green hydrogen is enticing, Plug Power still has significant work ahead of it to enhance its margins and improve its bottom line. Therefore, investors should avoid investing in the hydrogen company until significant improvements are made.
Despite Plug Power's ambitious plans to expand its hydrogen ecosystem and satisfy the increasing demand for its fuel cells, the company's financial performance has been disappointing. The continuous losses, decreasing sales, and mounting dilution of shares are concerning for potential investors looking into the finance sector, especially in the context of investing in Plug Power.