Plug Power's Revenue Growth is Accelerating. Is it Time to Buy the Hydrogen Stock?

Plug Power (NASDAQ: PLUG) reported its first-quarter results this week. The hydrogen company's revenue growth rate accelerated while its margins meaningfully improved. It was a step in the right direction for a company that has struggled mightily over the years due to a challenging operating environment and persistent losses.

Here's a closer look at Plug Power's first quarter report and whether the hydrogen stock is a buy.

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Signs of improvement

Plug Power reported $163.5 million in revenue during the first quarter, a 22% increase from the year-ago period. That's an acceleration from the 17.6% revenue growth rate it delivered in the fourth quarter (and 12.9% full-year sales growth rate). Plug Power's revenue also grew much faster than the analysts' consensus estimate of around $140 million. The company benefited from strong demand from new and existing customers, including Walmart and Amazon, in its materials handling business, growth in its electrolyzer solutions business, and higher hydrogen fuel sales.

The company's margins also improved, and its losses narrowed thanks to the success of its Project Quantum Leap initiative. The company delivered a 71% margin improvement in the period, driven by sales growth, cost optimization, improved service execution, and fuel sourcing efficiencies. While the company still reported an operating loss of roughly $109 million during the quarter, that's a vast improvement from the more than $178 million loss it posted in the year-ago period.

The momentum should continue

Plug Power expects to continue making progress on its plan to improve profitability. The company anticipates delivering continued revenue growth while streamlining operations to drive further margin expansion.

The company's electrolyzer solutions business remains a meaningful growth catalyst. Plug Power has deployed more than 320 megawatts (MW) of capacity globally. It has over $8 billion of additional projects in the pipeline across industrial and energy applications. Key current projects include a 100 MW system with Galp Energia in Portugal and a 25 MW system with Iberdrola and BP in Spain. The company is also advancing several new opportunities, including a 275 MW award for the Hy2gen project in Canada and projects with Allied Green Ammonia in Uzbekistan.

The revenue growth across all three of the company's business segments, along with continued progress in reducing costs, positions Plug Power to take the next step in its long-term profitability improvement goal. It aims to achieve positive earnings before interest, taxes, depreciation, and amortization (EBITDA) by the fourth quarter of this year. It then seeks to hit positive operating income by the end of next year and full profitability by the end of 2028.

Is it time to buy Plug Power?

Plug Power's improving financial results and balance sheet have powered a more than 300% surge in its stock price over the past year. However, the hydrogen stock is still down 50% over the past three years and 97% over the last decade due to its past financial trouble.

Given how far it has fallen, the stock could have further to run. Its financial results appear to finally be turning a corner. Further, it's a heavily shorted stock, making it ripe for a short squeeze. However, it's still a long way from reaching profitability. That high-risk, high-reward profile suggests you'd have to have a high risk tolerance to buy what would likely continue to be a very volatile stock.

Matt DiLallo has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool recommends BP. The Motley Fool has a disclosure policy.