Can Plug Power (PLUG) Stock Beat The Market?

Plug Power (NASDAQ: PLUG) is a pioneer in the hydrogen industry. It created the first commercially viable market for hydrogen fuel cell technology. It has now deployed over 69,000 hydrogen fuel cell systems and more than 250 fueling stations, more than any other company in the world.

Here's a look at whether Plug Power's strategy of becoming a leader in hydrogen has given it the power to beat the market.

Image source: Getty Images.

Analyzing Plug Power's returns

Plug Power has produced atrocious returns over the past five years compared to the S&P 500:

Data source: Ycharts.

The hydrogen company has lost most of its value over the past several years, woefully underperforming the surging S&P 500.

Two factors have contributed to Plug Power's abysmal returns. The company's operations have incurred significant losses. Through the first nine months of this year, Plug Power has posted a net loss of $785.6 million on only $484.7 million of revenue. That's worse than the $769.4 million net loss it recorded during the first nine months of last year on $437 million of revenue. The company has faced challenging operating conditions in the hydrogen market during a period when it has invested heavily to expand its business to capitalize on the future growth it anticipates in hydrogen demand.

As a result of its deep losses, Plug Power has had to raise outside capital from investors to fund its operations and expansion. It has done that through a variety of ways, including issuing new stock. Those stock sales have significantly diluted existing investors because the company issued new shares at increasingly lower prices. Plug Power's outstanding shares have surged more than 200% over the past five years, which has weighed meaningfully on the share price.

Can Plug Power beat the market from here?

Plug Power has taken several steps over the past year to reduce costs and shore up its funding situation. The company launched Project Quantum Leap earlier this year, a strategy aimed at reducing costs via workforce reductions, facility consolidations, and spending cuts. Plug Power aims to lower its annual expenses by more than $200 million through this initiative.

The company has also worked to shore up its liquidity. For example, it has generated over $275 million through the monetization of its electricity rights, secured $399 million in financing via a convertible notes sale, and raised $370 million when an existing investor exercised some of their stock warrants. These moves enabled the company to eliminate high-cost debt and fully fund its current business plan.

That business plan would see Plug Power start generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA) as it exits next year. Meanwhile, the company would end 2027 with positive operating income and finish 2028 by finally reaching overall profitability.

Plug Power has high risk and high potential

Plug Power hasn't come close to beating the market over the past five years. However, the next five years could be a different story. The company's losses are narrowing, and it has secured sufficient financing to fund its strategic plan. If the company successfully reaches profitability by 2028, it could deliver market-beating returns. However, if Plug falls short, investors may face further losses in the coming years.

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.