Wall Street got it wrong about plug-in power. Here’s why.

Hydrogen fuel developer stock Power socket (PLUG 3.77%) it was a bumpy ride. But since the start of 2021, this journey has been consistently lower. Back then, the stock was valued at $70 per share. Today, the stock price is below $3.

Wall Street has consistently been wrong about the future direction of stock prices. In 2021, just before the stock crashed, nearly a dozen firms had a buy rating on the stock.

Wall Street expectations have fallen sharply from those highs, but the average price target remains at nearly $5 a share — more than double the current share price. Could the analysts finally be right? Is now the time to bet big on Plug Power? The answer might surprise you. (NYSE:GS)

This is why Wall Street can’t predict the Plug

One of the biggest reasons Wall Street has struggled to accurately predict the direction of Plug Power stock is that its cash flow inflection point could be years, if not decades, in the future. Goldman Sachs analysts specifically called out the company for its far-out cash flow forecasts. According to those analysts, Plug Power has a capital duration of 25.8 years. This means that the weighted average of the company’s expected cash flows is about 26 years. Note that a bond of similar duration would be considered very in the long term.

Because Wall Street often uses a discounted cash flow model to value a company, it must estimate and then update projected cash flows back to the present. The more distant a cash flow is, the more sensitive it is to changes in assumptions.

Barring a sudden shift in regulatory policy, demand for hydrogen fuel cells is unlikely to peak until 2030 at the earliest. As global consultancy McKinsey recently concluded, “Global demand for clean hydrogen is expected to grow significantly through 2050, but infrastructure expansion and technological advances are needed to meet projected demand.” Addressing these infrastructure gaps will take many years. By then, Plug Power will likely spend billions in capital expenditures despite operating a money-losing business. Over the past year, for example, the company has spent between $100 million and $200 million per quarter to build new factories and other infrastructure needed for growth. However, during that period, net losses totaled well over $1 billion — more than half of the company’s entire market cap today.

All of this adds up to why Wall Street has been so wrong about Plug Power over the years. Analysts were asked to project cash flows that were far into the future. With mounting losses, increased competition and higher interest rates, these projected cash flows have been pushed further into the future, having an enormous negative effect on the share price.

Can Plug Power Stock Really Go Up 130%?

There’s an important question to ask right now: Is this time different? The average one year target price for Plug Power stock right now is $4.91. That’s about 130% higher than the stock’s current price. But it is important to know that there is a huge variation between the predictions. One price target, for example, is nearly $19 per share, while others are as high as $1.52 per share.

Can Plug Power Stock Go Up 130%? It is doubtful. All the pressures that caused the company’s share price to collapse in recent years persist to this day. In fact, they may be stronger than ever. While new regulations and incentives are increasingly tailored for increased hydrogen demand, it is clear that a potential transition would still take decades. The economics and infrastructure for scaling hydrogen fuel simply aren’t there yet. Meanwhile, Plug Power’s financial resources continue to dwindle. Last year, the company’s auditors issued a going concern notice, indicating that insolvency was imminent unless drastic measures were taken. Plug Power has addressed these concerns through massive shareholder dilution, which it has continued to do in recent quarters.

Plug Power is simply between a rock and a hard place right now. Its persistent losses force it to continuously exploit the debt and equity markets. However, positive cash flows remain many years away. This limits its ability to invest in new innovations, allowing competitors to develop newer, cheaper and more efficient solutions. Savvy investors should stay on the sidelines for now.