Plug Power (NASDAQ: PLUG) has been a high-profile renewable energy company for more than a decade, hoping to transform how we use energy by making hydrogen fuel more available and cost-effective.
As big as the hydrogen opportunity is, however, the ride for investors has been volatile. Losses have grown despite improving revenue, and hopes for future profitability have been pushed off again and again. Is now a time to buy Plug Power stock or steer clear?
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Plug Power’s appeal to investors has always been about growth. In the mid-2010s, the growth was in materials handling. Then came opportunities in backup power, and recently the opportunity is in electrolyzers turning renewable electricity into hydrogen fuel.
For the most part, the growth story has played out according to plan, with revenue surging over 6,000% since 2000. But revenue doesn’t tell the full story.
Growth without profits isn’t sustainable, and Plug Power’s losses are especially concerning.
Plug Power hasn’t just lost money as it’s grown — losses have outpaced revenue. For each dollar in sales over the past year, the company has lost more than $2 in both net losses and negative free cash flow.
These are not the trends we should be seeing from Plug Power. And there’s no end in sight to the losses.
In the first half of 2024, $145.1 million in equipment sales cost the company $265 million to produce. Power purchase agreements generated $38 million in revenue, but cost $109.5 million in cost of goods sold. Fuel delivered to customers cost $116.9 million to generate and resulted in just $48.2 million in revenue.
If a company can’t make money on what it sells, before paying for operating costs, the business isn’t sustainable.
And these losses aren’t new or temporary. Plug Power has been promising it’s close to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) break-even for over a decade, which I highlighted as far back as 2017!
What Plug Power has successfully done is raise funds for more than two decades in order to pay for its growth plans. You can see the share count is up 34,800% since the late 1990s, while the share price is down 98.7%.
Burning cash is costly, and investors pay for it through share dilution. But without dilution, the company would have run out of cash long ago.
Plug Power could keep this trend of share sales to fund growth going, but it now has debt on the balance sheet that makes the business riskier.
