The possibility of a climate deal in Washington sent shares of hydrogen producer Plug Power (NASDAQ:PLUG) up 20% so far this morning. However, PLUG stock is still down more than 25% on the year.
The stock has been whipsawed by the on-again, off-again negotiations in the U.S. Senate over climate funds and energy security. The latest move brings it just to its level as of mid-May.
Even at that price, Plug Power is richly valued. It had revenue of $500 million in 2021 and no profits, yet it sports a market cap of $12 billion.
The Hope Springs for PLUG Stock
Plug Power’s valuation is based on hope for “green hydrogen.” It uses feedstock from Olin (NYSE:OLN) chlor alkali plants, which make chlorine and caustic soda from brine using electrolysis. Plug Power captures, transports and sells this hydrogen for use in fuel cells. Fuel cells are used by utilities for back-up power and by warehouse forklifts for long-lasting, emissions-free transport.
Plug Power boasts huge orders and claims a large backlog. But it also faces an investor lawsuit saying management mischaracterized fuel delivery costs as research, and engaged in insider sales.
The stock also hasn’t been a great investment. It was unable to sustain speculative run ups in early and late 2021. It still trades at its November 2020 level. That’s thanks to huge secondary offerings of stock, made when the price was peaking. These let it buy Frames Group and Cryo Engineering, filling out its electrolyzer and hydrogen product lines.
What Happens Next?
The possibility of a climate bill doesn’t change Plug Power’s fundamentals. It’s still unprofitable and will likely remain so when it next reports earnings on Aug. 4.
But with more than $3 billion in cash, much of it from those secondary stock offerings, PLUG stock has a chance to either succeed or fail on its own terms.
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.
