Is Plug Power stock a buy now that its price has dropped below $2?

Actions of Power outlet (PLUG -1.46%) recently dipped below $2 per share, placing them around their 52-week low. Hydrogen stock is now down nearly 60% this year. It is further below its all-time high.

An optimist might say that the stock doesn’t have much to go before it bottoms out. It could also indicate hydrogen company tremendous growth potential as a reason to be optimistic that stocks could make an epic recovery.

However, there are reasons why the stock continues to slide, and it could not Stop until reach zero. Here’s why investors should not waste their money investing in Plug Power despite the low share price.

The losses continue to pile up Above

Plug Power is a financial wreck. Instead of growing rapidly, the company’s revenue has fallen sharply over the past year. It posted revenue of $143 million in the second quarter, down from $260 million in the year-ago period. Meanwhile, its total revenue in the first half of this year was only about $3 million more than it produced in the second quarter of last year.

Making matters worse, Plug Power is posting steep losses. The operating loss was $245 million in the second quarter, more than $100 million more than its revenue. It posted more than $500 million in operating losses this year, which is more than it did in the first half of 2023.

In addition to massive operating losses, Plug Power is consuming additional cash to expand its hydrogen network. The company spent nearly $194 million purchases of tangible assets in the first six months of this year. Its combination of losses and capital expenditure has puts significant pressure its finances.

A deluge of dilution

Plug Power’s cash-consuming business has forced it to take more steps to plug the holes in its finances. The company issued a boatload of stock over the years to raise cash to fund its operations and expansion initiatives. That caused him outstanding shares to explode wildly:

PLUG Diluted Average Shares Outstanding (Quarterly) by YCharts

The company has raised more than $570 million this year through public and private equity offerings. That’s it a massive quantity of inventory dilution for a company with a market capitalization currently about $1.7 billion.

Despite the issuance of all these shares, the company’s cash position (cash, cash equivalents and restricted cash) decreased from $1.5 billion. at the end of it last June to about $1 billion at the end of the second quarter. Meanwhile, the company has nearly $1.7 billion in total debt, which includes senior convertible notes, various lease obligations and other debt.

Plug Power is working to secure additional funding to expand its green hydrogen production facilities. It received a conditional commitment from the Department of Energy for a loan guarantee of up to $1.66 billion that it is working to close. This loan would help finance the development of up to six of its sites.

While that loan would help finance its expansion, the company still has to find ways to finance its money-losing operations. The hope is that as it expands its operations, it will eventually start making money. However, the profit turned out to be has been elusive for Plug Power over the years, and since there’s no guarantee it will ever become consistently profitable, it will likely need to keep selling stock to fund its operations. That dilution could add more weight to its share price, pushing it even lower.

Plug Power is not a purchase at all price

It’s easy to get caught up in the hype surrounding Plug Power. Build a leading hydrogen business to capitalize on what could emerge as a massive future market.

However, the company continues to consume money to run its business and expand its operations. It’s not likely to turn the corner anytime soon, so the share price could continue to fall. That’s why it’s not worth buying at the low price right now because Plug Power could dilute its stock all the way down to zero.