Why Is Wall Street So Bearish on Plug Power? There's 1 Key Reason.

Key Points

• One analyst gives the stock a price target of $0.75.

• Profitability concerns create ongoing risks for investors.

• 10 stocks we like better than Plug Power ›

Plug Power (NASDAQ: PLUG) has captivated growth investors for decades. The company specializes in producing hydrogen fuel systems, a segment of the market that could see massive growth rates throughout the rest of this century. There should be plenty of near-term growth, too. According to research published in 2024 by Bloomberg, clean hydrogen fuel demand is expected to "skyrocket 30-fold to 16.4 million metric tons per year by 2030."

But investors aren't all on board: Some Wall Street analysts remain bearish on the stock. Morgan Stanley analysts, for example, rate PLUG stock as a sell with a price target of just $0.75 -- roughly 50% below the current share price.

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This is the No. 1 problem with Plug Power stock today

While industry forecasts call for major hydrogen fuel demand growth, the technology is still largely uncompetitive versus traditional fossil fuels, and even versus renewable sources like wind and solar. As Bloomberg's research highlights, demand growth forecasts will be very sensitive to changes in government regulations and subsidies -- two components that are critical in making hydrogen fuel economically viable.

A lack of economic viability has consistently reduced demand for Plug Power's products over the decades. The company itself has often been reliant on large government subsidies to remain financially afloat. This is exactly what Wall Street analysts are worried about. Morgan Stanley's analysts have been sounding the alarm since 2023. "We see significant risk around PLUG's business model," they wrote then. "On paper, PLUG's strategy makes sense to us, but we have reduced confidence in the company's ability to execute on that strategy barring a potential dilutive capital raise."

Image source: Getty Images.

Morgan Stanley's concerns were prescient. Since that time, Plug Power has nearly doubled its share count, massively diluting shareholders in an attempt to stay financially viable. Today, the company continues to post negative net incomes quarter after quarter.

The future is bright for hydrogen fuel. But Plug Power's lack of profitability continues to concern analysts, and is something investors have to watch.

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Ryan Vanzo 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.