Shares of Plug Power(NASDAQ: PLUG) recently slid under $2 a share, putting them around their 52-week low. The hydrogen stock is now down nearly 60% this year. It's even further below its all-time high.
An optimist might say that the stock doesn't have much farther to go before it hits bottom. They could also point to the hydrogen company's tremendous growth potential as a reason to be bullish that shares could stage an epic recovery.
However, there are reasons the stock keeps slipping and might not stop until it hits zero.Here's why investors shouldn't waste their money investing in Plug Power despite the low stock price.
The losses continue to pile up
Plug Power is a financial train wreck. Instead of growing briskly, the company's revenue has fallen sharply over the past year. It posted $143 million in revenue in the second quarter, down from $260 million in the year-ago period. Meanwhile, its total revenue in the first half of this year was only about $3 million more than it produced in the second quarter of last year.
Making matters worse, Plug Power is posting steep losses. Its operating loss was $245 million in the second quarter, over $100 million more than its revenue. It has recorded over $500 million in operating losses this year, which is more than it did in the first half of 2023.
In addition to posting massive operating losses, Plug Power is burning through additional cash to expand its hydrogen network. The company spent nearly $194 million on the purchases of property, plant, and equipment during the first six months of this year.Its combination of losses and capital spending has put a significant strain on its finances.
A flood of dilution
Plug Power's cash-draining business has forced it to take multiple steps to plug the holes in its finances. The company has issued a boatload of stock over the years to raise cash to fund its operations and expansion initiatives. That has caused its outstanding shares to skyrocket:
PLUG Average Diluted Shares Outstanding (Quarterly) data by YCharts
The company has raised over $570 million this year via the proceeds of public and private stock offerings. That's a massive amount of stock dilution for a company with a market cap currently around $1.7 billion.
Despite issuing all that stock, the company's cash position (cash, cash equivalents, and restricted cash) has fallen from $1.5 billion at the end of last June to around $1 billion at the end of the second quarter. Meanwhile, the company has nearly $1.7 billion of total liabilities, which includes convertible senior notes, various lease obligations, and other liabilities.
Plug Power is working to secure additional funding to expand its green hydrogen production facilities. It has received a conditional commitment from the Department of Energy for an up to $1.66 billion loan guarantee that it's working to close. That loan would help fund the development of up to six of its sites.
While that loan would help finance its expansion, the company still needs to figure out ways to fund its money-losing operations. The hope is that as it scales its operations, it will eventually start making money. However, profit has proved to be elusive for Plug Power over the years, and since there's no guarantee that it will ever become consistently profitable, it will probably need to continue selling stock to fund its operations. That dilution would be likely to add more weight to its share price, pushing it even lower.
Plug Power isn't a buy at any price
It's easy to get caught up in the hype surrounding Plug Power. It's building a leading hydrogen business to capitalize on what could emerge as a massive future market.
However, the company continues to burn through cash to operate its business and expand its operations. It isn't likely to turn the corner anytime soon, so its stock price could continue to sink. That's why it's not worth buying at the currently low price since Plug Power could dilute its stock all the way down to zero.
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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
