Should You Buy Plug Power Stock While It's Below $4?

Plug Power (NASDAQ: PLUG) has lost about 99% of its value since its initial public offering in 1999. The hydrogen fuel cell maker was once considered a promising green energy play, but it ran out of juice as its growth cooled off and it racked up steep losses. The dot-com crash and some accounting problems from 2018 to 2020 exacerbated its decline.

But with its stock trading at about $2, Plug Power's enterprise value of $2.6 billion values the company at just two times next year's estimated sales. Analysts also still have an average price target of $4 on the stock. So should you buy this unloved stock and expect it to more than double over the next few years?

Why did Plug Power's stock collapse?

When Plug Power went public, it initially planned to develop hydrogen-powered residential systems. But that idea never took off for two reasons: It cost more to produce hydrogen than oil or natural gas, and it was more cost-efficient to expand existing electrical grids than to build new hydrogen-powered infrastructure.

Plug Power eventually abandoned that ambitious plan and pivoted toward a new niche market of selling fuel cells and charging services for forklifts in warehouses and fulfillment centers. It's already deployed over 69,000 fuel cell systems and 250 fueling stations across the world, and it's now the world's largest single buyer of liquid hydrogen.

That core business gained Amazon and Walmart as its top customers, but Plug Power subsidized its fuel cell sales to those two retailers with stock warrants -- or options to buy more of its own shares at a discount. That unusual arrangement turned Amazon and Walmart into Plug's top investors, but it subsequently restated all of its financials from 2018 to 2020 because it didn't properly disclose how those incentives temporarily eclipsed its customer payments.

After those recalculations, Plug Power's reported revenue actually turned negative in 2020. Its revenue turned positive again in 2021, but its growth cooled off over the following two and a half years as its operating and net losses widened:

Data source: Plug Power.

Moreover, most of Plug Power's revenue growth from 2021 to 2023 was driven by two big acquisitions that expanded its cryogenic equipment unit. That inorganic growth masked the weakness of its main hydrogen fuel cell business, which struggled as the macro headwinds reduced the market's demand for expensive new hydrogen projects. The costs of integrating those businesses also crushed its operating margins.