Should You Buy Plug-in Power While It’s Below $2.50?

Power outlethis (PLUG -3.09%) Hydrogen fuel cell solutions could help usher in a newer, cleaner and more sustainable energy source. With some estimates that the green hydrogen energy market could grow to $30 billion by 2030, Plug Power’s long-term opportunity is huge.

However, despite being one of the leading hydrogen energy stocks, the company has struggled mightily over the past few years. The stock recently peaked in 2021 at around $75 per share, but has since fallen 97%.

At under $2.50 per share, Plug Power may seem like a bargain, but there are a few things you’ll want to know before you get your hands on this energy company.

Green hydrogen has massive long-term potential

Plug Power is a leading player in the hydrogen energy industry and was one of the first to create a commercially viable market for its hydrogen fuel cell technology. Its technology uses hydrogen and oxygen to produce electricity without combustion and is used in material handling vehicles (forklifts), stationary power plants (generators) and electric delivery vans. Some of its top clients include Amazon and Walmart.

The company is working on building an end-to-end hydrogen ecosystem, including the production, storage, transportation and distribution of liquid green hydrogen. Earlier this year, it began producing liquid hydrogen at its production facility in Georgia.

Plug Power is looking to capitalize on a massive long-term growth opportunity. A recent report published by Markets and Markets Research says that the green hydrogen market could be worth $30.6 billion by 2030. That would represent a staggering 61% compound annual growth rate over the next few years.

Plug Power continues to bleed cash

While the long-term market potential of green hydrogen is vast, it comes at a significant cost to Plug Power, which continues to lose money year after year. Despite being a publicly traded company for a quarter of a century, it has never produced a full-year net profit.

PLUG Revenue (TTM) data by YCharts.

Not only that, but despite rising revenues, its losses grew even higher. In the past 12 months, Plug Power brought in $684 million in revenue, but lost $1.5 billion.

This raises another question for investors: If Plug Power isn’t making money, how is it still in business? The answer is primarily through shareholder dilution. Plug Power has consistently turned to the equity markets to raise capital to finance its operations.

Over the past decade, Plug Power’s average diluted shares outstanding have grown from 170 million to 737 million. In other words, a share is worth less than a quarter of the original stake from the dilution alone.

PLUG Diluted Average Shares Outstanding (Quarterly) by YCharts.

What’s next for Plug Power?

For Plug Power to be a more attractive investment, the company needs to start making a profit. However, its recent earnings show no signs of changing anytime soon. In the second quarter, the company posted revenue of $143 million, well below analysts’ expectations of $185 million.

Not only that, but the company is projecting 2024 revenue between $825 million and $925 million, with the midpoint of that estimate below consensus estimates of $908 million.

The company is taking steps to reduce its cash burn, improve its margins and strengthen its balance sheet. In Q2, the company reduced its net cash used in operations plus capital expenditures by 30% and will look to continue reducing expenses in the second half.

It recently hired Dean Fullerton as its new Chief Operating Officer (COO) to help with these initiatives. Fullerton comes from Amazon, where he oversaw engineering services for the e-commerce giant in North America, Europe and emerging companies. Plug Power hopes Fullerton can help it improve operational efficiency throughout its supply chain.

Is it a purchase?

Plug Power has a plan in place, and investors will want to pay close attention to its earnings and management guidance in the coming quarters. While the company continues to burn cash, it is saying the right things about becoming more efficient, slowing its cash burn and moving toward making its businesses more profitable.

That said, it’s a company that has yet to turn a profit in its entire history and has significantly diluted its shareholders in the process. So while the long-term opportunity in green hydrogen is massive, I want to see Plug Power make significant progress on its margins and bottom line before considering an investment in the green energy company.