Buoyed by the post-election stock market rally, Plug Power (PLUG -1.03%) stock ran up to a recent high of $3.15 on Jan. 6. On that day, Plug stock closed at a price not seen since the previous summer. But it's been all downhill from there.
From Jan. 6 through Plug's earnings day on March 3, shares of the hydrogen fuel producer and hydrogen fuel cell manufacturer lost more than half their value, plunging all the way to $1.50 per share. That's more or less where it is today, even after a brief post-earnings bounce.
Investors have to be asking if that's it, or if Plug is going to keep moving higher. Should you rush in and buy Plug stock now while it's still below $2?
Earnings unplugged
Plug reported its 2024 numbers on March 3, and the news was not good. Sales of equipment (hydrogen fuel cells) plunged 45% year over year, indicating extremely weak demand for Plug's product. Fuel sales (hydrogen) grew 48%, which is great, but they grew from a much smaller base and failed to plug the gap. Plug's overall revenue collapsed, down 30% from 2023 levels.
Losses grew at the gross (23% more year over year), operating (50% more), and net (54% more) levels, and Plug ended the year with $2.1 billion in losses, which worked out to $2.68 per share.
This per share loss was only 16.5% worse than in 2023, true. But only because Plug issued and sold a lot of shares to raise cash and keep itself solvent in 2024. The company's share count grew by 32%, spreading losses over many more shares outstanding, thus resulting in per-share losses less than they would have been had the share count held steady.
Oh, and we should probably mention why Plug needed to sell so many shares. Plug burned through just over $1 billion in negative free cash flow in 2024, consuming cash and necessitating the share sales to raise more cash.
What to expect from Plug in 2025
Will 2025 bring more of the same? This was the subject Plug management spent most of its time discussing in its earnings release: How does Plug dig itself out of this hole and get back on what it calls its "path to profitability?"
Well, to hear Plug tell it, it's doing this already. Plug has been busy "optimizing operations, streamlining its workforce, consolidating facilities, increasing pricing on certain offerings, reducing working capital, and reprioritizing certain hydrogen and new product investments." As a result, as management points out, cash burn in 2024 was already down significantly from the $1.8 billion Plug consumed in 2023.
To continue stretching the cash it has left, Plug has announced "Project Quantum Leap," which will include layoffs, consolidations, inventory reductions, capital spending reductions, and other cost-cutting that, combined, could reduce annual expenses by $150 million to $200 million.
Plug has about $405 million in restricted and unrestricted cash remaining at the last report, which is actually up from 2023, a consequence of all the stock sales mentioned above. To further inflate its cash cushion, management announced Wednesday that it had sold 46.5 million more shares, bundled with 138.9 million warrants to buy shares for a de minimis price (exercisable if Plug's stock price reaches $2), for $1.51 per bundle. The $280 million Plug says it raised from this share sale should lift Plug's available cash to about $685 million.
Image source: Getty Images.
Is Plug stock a buy under $2?
Considering all the above, let's now answer the question: Should you buy Plug Power stock below $2 a share?
I say "no."
Viewing all the above numbers most favorably to Plug, the $1 billion cash burn rate, the plan to reduce that rate by $200 million, and the $685 million in cash in the bank, I calculate that Plug Power will still run out of cash before the end of 2025 and will need to sell even more shares.
I also note that the 185.4 million "common stock equivalents" just sold by Plug, when added to the 925.2 million shares outstanding on earnings day, will increase Plug's shares outstanding to 1.11 billion, further diluting current investors and probably pushing down the value of Plug's stock. What's more, most of this dilution will happen only if Plug Power stock hits $2 a share so that the warrants can be exercised. In other words, even assuming Plug stock ever gets back to $2 a share, the moment it does, it's going to fall back down again as a wave of new shares crushes the stock price.
