Why Plug Power Stock Plunged 24% in August

Power socket (PLUG 5.59%) has been in freefall in recent months, with the hydrogen stock still losing 23.9% in August, according to data from S&P Global Market Intelligence. Plug Power stock is now down 40% in just three months. What is going on here and is there any hope for investors?

Plug Power’s biggest problems

Plug Power might be a leader in green hydrogen, but the company is making huge losses, burning cash fast, and running out of cash. Investors expected some respite from the company’s second-quarter earnings report, but it was not to be. In fact, the company’s sales are also declining.

In early August, Plug Power reported a massive 45% year-over-year drop in its revenue to $143 million for the second quarter. Worse yet, it suffered a net loss of $262 million on that revenue, which again was up about 11% year-over-year. Plug Power also ended the quarter with cash and equivalents of just $62 million, compared to $135 million as of December 31, 2023.

Due to the dire state of its cash flows and balance sheet, Plug Power has been constantly selling shares to raise funds, including in the last quarter, further diluting the wealth of existing shareholders and eroding its share price.

Unsurprisingly, several analysts were quick to cut their price targets on Plug Power shares last month after a dismal earnings report, further adding to the selling pressure on the stock.

Why Plug Power Stock Keeps Falling

Plug Power has tried hard to convince investors about its growth prospects, insisting the company is at an inflection point as it installs more electrolyzers, expands sales, cuts costs and reduces its cash burn in the second half of the year 2024. Management also insisted it is working closely with the Department of Energy (DOE) to secure a $1.66 billion loan that should help Plug Power finance the construction and development of up to six hydrogen plants.

Plug Power’s stock rose after getting a deadline from the DOE earlier this year, but enthusiasm has faded and investors are reluctant to bet more on the company’s technology until it can prove profitability. That seems like a tall order given Plug Power’s low sales growth and high costs. To put some numbers on that, Plug Power expects to generate just $825 million to $925 million this year, down from $891 million in 2023, which similarly fell well below its previous guidance for 2023 , from $1.2 billion to $1.4 billion.