Hydrogen supplier Plug Power (NASDAQ:PLUG) fell sharply after Morgan Stanley downgraded PLUG stock.
The downgrade came less than two months after the broker reiterated an equal rate recommendation. TV analyst Jim Cramer also said this week Plug Power is a “no-go” for him.
Shares fell 11% on Dec. 5 and another 5% overnight. PLUG stock was due to open this morning at $4.04 per share, a market capitalization of under $2.5 billion.
The company issued a “going concern” warning on Nov. 10 after losing $284 million in the third quarter and stating it had just $110 million in cash.
Pulling the Plug
Plug Power started as a producer of small hydrogen fuel cells powering warehouse forklifts. Hydrogen fuel gave its products more range than batteries. Hydrogen also doesn’t pollute warehouse air like fossil fuels.
Plug Power then staked its future on “green hydrogen,” which is hydrogen produced without burning fossil fuels. It signed deals with Olin (NYSE:OLN) to extract hydrogen from alkali plants and built a distribution network. During a recent Investor Day, the company unveiled a “gigafactory” near Rochester.
But there have recently been discoveries of “white” hydrogen, drilled for like natural gas. The oil industry is also pushing “blue” hydrogen, made by burning natural gas. Hydrogen is hydrogen, regardless of how it’s produced, and cheaper gas will eventually win the market.
This put Plug Power into a tailspin. It canceled two new plants recently and delayed a third. Shares were worth over $66 each in early 2021, surged to nearly $30 in the summer of 2022, but have lost two-thirds of their value in 2023.
Bankruptcy seems a likely outcome, according to Invezz.
PLUG Stock: What Happens Next?
Short-term problems in the hydrogen market impact more than Plug Power. Nikola’s (NASDAQ:NKLA) efforts to produce hydrogen-fueled semi-trucks may also be in jeopardy.
As of this writing, 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.
