Since 2020, Plug Power has experienced an impressive 186% revenue growth, fueling optimism among investors. However, there's a more critical number investors should keep an eye on right now.
Plug Power (NASDAQ:PLUG) stock has long been a volatile ride for investors, with periods of substantial gains and others marked by significant losses. This boom-or-bust nature reflects the inherent volatility of the hydrogen industry, which holds both immense growth potential and substantial risk.
Since 2020, Plug Power has experienced an impressive 186% revenue growth, fueling optimism among investors. However, there’s a more critical number investors should keep an eye on right now.
Despite the revenue increase, Plug Power is facing significant financial challenges, with a gross loss of around $600 million over the past 12 months—nearly as much as its total revenue.
While Plug Power's revenue growth is certainly noteworthy, the burning question remains: why hasn't profitability followed suit? The answer lies in the company's business model. Plug Power designs and manufactures the infrastructure needed to harness hydrogen, a promising, climate-friendly fuel source. However, hydrogen technology remains expensive to produce, and the infrastructure to support it is costly to build. Despite progress, hydrogen still isn't cost-competitive in many sectors.
This puts Plug Power in a challenging position, reliant on government subsidies and smaller pilot projects to remain afloat. In the long term, achieving profitability will be key for the company's survival and growth. This is why investors should focus not only on revenue growth but on tracking gross profits.
For those considering an investment in Plug Power, it's essential to assess the risks. While the potential for hydrogen to transform industries like transportation, aviation, and cement production is substantial, the company faces steep costs and profitability hurdles that must be addressed for it to continue growing.
Before deciding to invest, it's worth noting that Plug Power was not among the “best stocks” identified by The Motley Fool Stock Advisor, which recently picked 10 stocks poised for strong returns in the future. For reference, Nvidia, which was picked by the service in 2005, has seen remarkable growth, turning a $1,000 investment into $885,388.
As with any investment, it's crucial to understand both the high upside and significant risks associated with Plug Power.
