Plug Power(NASDAQ: PLUG), a leading developer of hydrogen charging and storage technologies, has been a disappointing long-term investment. It went public at a reverse-split-adjusted price of $150 in 1999, soared to a record high of $1,498 at the peak of the dot-com bubble in early 2000, but now trades at less than $2.
However, with a market cap of $1.8 billion, Plug looks cheap at less than two times next year’s sales. Should you consider it an undervalued play on the nascent hydrogen market?
Image source: Getty Images.
Plug Power originally planned to build hydrogen charging systems for homes. However, high infrastructure costs, regulatory challenges, and weak consumer demand crushed those dreams.
After that plan collapsed, it started to develop hydrogen fuel cells and charging systems for warehouse forklifts instead. Amazon and Walmart became its top customers as well as its biggest investors through stock warrants.
The company initially subsidized its fuel cell sales to Amazon and Walmart with those stock warrants. That unusual strategy caused its reported revenue to turn negative in 2020 as its big subsidies eclipsed its other customer payments.
After restating its financials, revenue turned positive again in 2021. But over the following three years, its top-line growth slowed, its operating margins collapsed, and its net losses widened at an alarming rate.
Most of its growth in 2022 and 2023 was inorganically driven by two acquisitions that expanded its smaller cryogenic-storage equipment business instead of the organic growth of its hydrogen fuel cell, charger, and electrolyzer segments.
Metric
2021
2022
2023
2024
Revenue
$502 million
$701 million
$891 million
$629 million
Growth (YOY)
N/A*
40%
27%
(29%)
Operating margin
(87%)
(97%)
(151%)
(321%)
Net income
($460 million)
($724 million)
($1.37 billion)
($2.1 billion)
Data source: Plug Power. YOY = year over year. *Due to restatements.
Plug Power has already deployed 72,000 fuel cell systems and 275 fueling stations across the world, but rising interest rates, tariffs, and other macro headwinds are curbing the market’s appetite for expensive hydrogen charging projects.
Many companies also continue to invest in battery-electric solutions, which are generally cheaper and easier to deploy than hydrogen-powered systems. Although Plug Power is gaining traction in warehouses and fulfillment centers, it could struggle to break out of its niche, scale up its business, and generate consistent profits. That’s why its stock trades so far below its all-time high — and why it’s trading at such low valuations.
Plug Power faces a lot of near-term challenges, but its insiders bought nearly 20 times as many shares as they sold over the past 12 months. That warmer insider sentiment suggests it’s finally reaching an inflection point as a few catalysts kick in.
Earlier this year, it secured a $1.66 billion loan guarantee from the U.S. Department of Energy to fund construction of six green hydrogen manufacturing plants. The Trump Administration’s new tax bill also extends tax credits for the hydrogen industry through 2027. That fresh government support should help the company — which ended its latest quarter with just $141 million in cash and equivalents — stay solvent as it scales up its business.
To accelerate that expansion and dilute its costs, it’s ramping up its production of green hydrogen at its plants in Texas and Georgia. It also launched a new joint venture with Olin to build a hydrogen liquefaction plant in Louisiana.
To further stabilize its margins, early this year, it launched Project Quantum Leap, a cost-cutting initiative aimed at trimming its annual expenses by up to $200 million. Its backlog is still swelling with new deals, including one to supply electrolyzers to Allied Green Ammonia in Australia.
For 2025, Plug Power expects its revenue to rise at least 11% to $700 million as its gross margin turns positive during the fourth quarter. It expects that recovery to be led by its hydrogen fuel cell, infrastructure, and electrolyzer businesses as the macro environment stabilizes.
Analysts expect its revenue to rise 13% in 2025, 39% in 2026, and 35% to $1.3 billion in 2027. We should take those optimistic estimates with a grain of salt, but they imply that its business bottomed out in 2024 and will profit from the hydrogen market’s gradual expansion.
Plug Power disappointed a lot of investors over the past quarter-century, but it could finally be the right time to accumulate this unloved green energy stock. Its recovery is still wobbly, and it’s burning a lot of cash, but it could generate big multibagger gains once its longer-term catalysts kick in.
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