Plug Power (NASDAQ:PLUG), the hydrogen company that was downgraded just a week ago, rose this week after getting a big contract for electrolyzers in Europe.
The deal is a Basic Engineering Design Package (BEDP) for a plant that will use electricity to split hydrogen from oxygen in water. The company says it now has such contracts for plants that will generate 4.1 gigawatts of hydrogen-based electricity.
PLUG stock jumped 5.6% on the news. It opened this morning at $4.69 per share, a market capitalization of about $2.85 billion. Despite a rocky morning, PLUG stock is up over 30% for the week.
The Hydrogen Puzzle
Building a hydrogen energy system involves several moving parts. You need to create or obtain hydrogen. You need to transport it to where it’s needed. Then, you need to get customers who will buy it at a profitable price.
While rivals like Bloom Energy (NYSE:BE) and FuelCell Energy (NASDAQ:FCEL) have mainly focused on devices that use hydrogen, Plug Power has tried to build out the entire cycle.
This is expensive, requiring regular injections of new capital. It’s risky because Plug Power’s “green hydrogen” must compete with supplies gathered in other ways. This includes hydrogen collected from burning natural gas. Plug Power issued a “going concern” warning in November, worried it would go out of business without government help.
However, having several capabilities means Plug Power also has several potential revenue sources. It can sell hydrogen, fuel cells, and the electrolyzers that create hydrogen.
The ups and downs can leave CEO Andy Marsh feeling smug when things go right. But the risk in the business also draws short sellers. Fintel says 29% of Plug Power’s stock is now held short, including 62% of shares held off exchanges.
Over at Stocktwits, the new orders have bulls chortling. As one said: “The trolls are lining up for the firing squad this morning!”
PLUG Stock: What Happens Next?
Plug Power is a high-wire act, but every great company starts that way. So does every failed one. Without great risk, there can be no great reward.
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.
