Plug Power (NASDAQ:PLUG) stock has certainly gained recognition for its green hydrogen business model. This company is a leader in hydrogen fuel cells and services, often seen as benefiting green energy infrastructure. With government spending increasing and EV adoption growing rapidly, PLUG stock has the potential to be a big winner.

Unfortunately, a slowdown in green energy stocks and a macro backdrop that’s not as conducive to growth in this space has dimmed the thesis behind PLUG stock.

Over the past year, shares of this hydrogen fuel cell company have dropped more than 70%. That’s certainly not the growth backdrop investors want to see.

Plug Power has begun a cost-cutting program, looking at saving $75 million per year. The hope is to stabilize its operations during a challenging period.

That said, a recent “going concern” statement has been issued, tied to the company’s ongoing cash burn and production facility ramp up schedule.

Let’s dive into the bull and bear case behind this stock, and see what to make of this recent decline.

The Bull Case for PLUG Stock

Plug Power’s new production facility launched in January certainly provides investors with a pathway for future growth. This facility is expected to produce 15 tons of green hydrogen per day, as of the second quarter.

By year-end, the hope is to ramp up production to 40 tons. Previously reliant on costly hydrogen purchases, this move toward production should theoretically help the company improve its cost structure further.

With new Texas and New York facilities in the pipeline, the company expects further cost reduction to $3-$5 per kilogram. This should lead to continued improvement in the company’s financials, which have certainly provided some investor concern.

In the recent quarter, Plug Power’s anticipated loss per share was $0.32, up 8.6% from the previous year. Expected earnings for the current fiscal year are -$0.94, up 59.1% from last year, with a 0.4% change. The forecasted earnings for the next fiscal year are -$0.48, a 48.9% increase, with a -2% change.

Despite widening losses, Plug Power’s outlook offers optimism for bulls, given the direction its earnings are moving. One could make the argument that this stock is undervalued on the basis of sooner-than-expected profitability (as various write-downs are removed from the comps).

If Plug Power can ramp up efficiently, and generate margin expansion, this could be a speculative play in the green hydrogen space worth considering.

The Bear Case

Plug Power’s impressive clientele and its growth prospects tied to infrastructure spending increases is certainly nice. However, the key issue the company faces is that selling hydrogen fuel continues to lead to significant losses.

Some analysts believe that this business simply isn’t economical. And with the cost of green hydrogen generation significantly higher than other grey forms of hydrogen (produced as a natural gas byproduct), there’s questions around the company’s viability as hydrogen customers themselves look to focus on costs.

Plug Power’s negative margins and hefty operating losses have led to significant cash outflows. Last year, the company burned through $1.8 billion in cash, and currently only has roughly $1.1 billion in cash left on its balance sheet.

So, either the company improves its margins markedly over the next year, or more debt/equity financing will need to be sought out. At the company’s diminished stock price, that could be very detrimental to existing shareholders.

Those bearish on this stock may note that cost-cutting efforts may not be enough, given the company’s high capital expenditures expected for some time.

Project delays have hindered the company’s construction expansion timeline, and with only one plant functional (and five planned), it’s unclear where the capital will come from to fund these expansion efforts.

Bottom Line

Plug Power’s potential is clearly there, and that’s why so many investors remain bullish on this hydrogen fuel cell player. Certainly, a future that involves green hydrogen is one I want to be a part of.

The question is whether Plug Power can operate in this sector in a profitable way. I’m not so sure the numbers pencil out right now.

The key issue for me when it comes to this stock is its cash burn situation, and the amount of capital that’s going to be needed in order for Plug Power to ramp up effectively.

Until the company can show a path to profitability and shareholder capital return, this is a stock I’m going to have to put in the sell bucket, at least for now. It’s a company I want to be bullish on, but the fundamentals just unfortunately don’t allow for such a position right now, in my view.

On the date of publication, Chris MacDonald did not have (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.