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Plug Power Stock Looks Promising, But Don’t Get Too Excited Now

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Since reporting third-quarter results on Nov. 9, Plug Power (NASDAQ:PLUG) stock has been volatile, trading in a 20% range.

3d render image of hydrogen energy fuel cell from Plug Power
3d render image of hydrogen energy fuel cell from Plug Power

Source: Shutterstock

The share price has been as low as $39, and as high as $45, as investors balance losses and growth with the promise of the “green hydrogen” market.

For the three months ending in September, Plug Power lost $106 million, 19 cents per share, on revenue of $144 million. A year earlier it lost $65 million, 18 cents per share, on revenue of $107 million.

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Revenue grew 34%, but losses also grew from 60% of revenue to almost 74%. The loss would have been worse except for sales of new stock. Yet shares are up 4.5% over where they were when earnings were announced, thanks mainly to the promise of “green” hydrogen.

A Closer Look at PLUG Stock

Hydrogen doesn’t really come in multiple colors. It’s just defined that way for market purposes.

“Blue” hydrogen uses natural gas as a feedstock. Green hydrogen uses electricity to split water molecules into its constituent atoms, which are oxygen and hydrogen.

Hydrogen is used in fuel cells to deliver power by reversing the green hydrogen process. Hydrogen in the fuel cell combines with oxygen in the air, creating electricity with water as the byproduct.

Plug Power began by making these fuel cells mainly for forklifts in warehouses. Hydrogen beats electricity in warehouses for range and both beat fossil fuels for cleanliness.

Plug Power decided last year to focus on becoming a green hydrogen supplier, starting with an Olin (NYSE:OLN) Chlor-alkali plant in Tennessee.

The Olin plant was already separating water, using electrolysis, to create caustic soda and chlorine from brine. A Plug Power acquisition called United Hydrogen was able to collect the hydrogen, while another new unit called Giner ELX could sell it.

This year, Plug Power is taking its green hydrogen ideas global. It has a partnership to create plants in Europe. It’s building a plant in Australia. It’s also building a fuel cell manufacturing plant in New York state.

TV analyst Jim Cramer has called the environmental trend represented by Plug Power “unstoppable.”

Green Versus Blue Hydrogen

Analysts are also arguing about green and blue regarding Plug Power, but this argument involves whether to invest green money or feel blue about its prospects.

Citigroup (NYSE:C) recently promoted a trade to buy Plug Power while shorting a competitor, Ballard Systems (NASDAQ:BLDP). This helped give Plug Power its post-earnings gain.

For the year Plug Power’s performance now matches that of the S&P 500, with both up 26%. But Plug Power has been as high as $69 on optimism over green hydrogen.

It’s been as low as $23 on financial results.

While the stock is hot, Plug Power is also adding to its portfolio. It has completed the October purchase of Applied Cryo Technologies, which helps store and move gas in liquid form.

The conflict between blue and green can be found in the fact that Applied Cryo is a Houston company.

The Bottom Line

I have written that Plug Power is a long-term play. You can buy and sell it as a trade, but you can also choose to invest in its plans to build a vertically-integrated green hydrogen solution, which it calls GenKey.

GenKey will encompass the creation, distribution, and direct sale of hydrogen through a common infrastructure.

It’s a different business model from the forklifts Plug Power began with. It takes advantage of all demand from hydrogen fuel cells, including that from FuelCell Systems (NASDAQ:FCEL), with which it has been compared in the past.

If you believe in the promise of hydrogen, produced without natural gas, as a profitable fuel stock, Plug Power is the stock you want to own.

Just remember that profits, if they ever arrive, are still on the distant horizon.

On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.

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