Plug Power (NASDAQ:PLUG), a producer and distributor of hydrogen for fuel, may have a great long-term future. But short-term concerns are sending PLUG stock down.
Shares fell about 5% in the wake of a multi-day symposium where the company claimed it could have $5 billion in revenue within four years. However, it also cut its 2022 production forecast and cancelled two plants.
The result is that Plug Power will miss its earlier revenue forecast of $900 million by as much as 10%. Shares opened Oct. 21 at about $16 with a market capitalization of about $9 billion.
Plugging Into Hydrogen
While attractive in a chemical way, because “burning” hydrogen means oxidizing gas to create energy and water, hydrogen is difficult to make and transport absent natural gas. Hydrogen produced with such fossil fuels is called “blue hydrogen.” Plug Power has been working with Olin (NYSE:OLN) to process “waste” from chlor-alkali plants for “green hydrogen.”
Its latest Olin deal, for a 15-ton-per-day plant in Louisiana, is going forward. Construction has also begun on a plant with similar output expectations in south Georgia. But plans to use renewable power to split water into its components in Pennsylvania and Canada have been abandoned, and a plant in New York is having permitting delays.
Chief Strategy Officer Sanjay Shrestha insisted the company can hit its target of 200 tons of production per day next year. But that would mean quadrupling production from the 50 tons per day it plans for the end of this year.
In addition to producing hydrogen, Plug Power is also building infrastructure for moving it in tanker trucks and selling it to warehouses and airports to power essential operations.
What Happens Next for PLUG Stock
The how of hydrogen matters as much as the what. Using fossil fuels wastes natural gas, and using solar and wind power costs electricity. The chlor-alkali solution is working, but might not scale as much as hydrogen advocates would like.
While Plug Power should be considered a long-term play, it’s still a volatile stock. Shares have traded around $30 several times in 2022, but they have also been below $14. The current price is near the year’s low and represents a 50% discount from a September high.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.