Is Plug Power Stock Dead Money, or Is a Comeback Coming?

For decades, investing in Plug Power (NASDAQ: PLUG) was a dead-money play. Since the hydrogen company went public in late 1999, it has accumulated a deficit of nearly $8.7 billion. Plug Power has never turned an annual profit and has significantly diluted shareholders as it invested heavily in building out green hydrogen infrastructure.

The company is taking steps to address its ongoing cash burn and turn things around. To do so, management is launching "Project Quantum Leap," an initiative to shift away from capital-intensive investments and toward operational efficiency.

Plug Power hopes to generate its first net profit in 2028. For investors considering the hydrogen stock, here's what Plug is doing to turn things around.

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Plug Power has been a money pit for investors

Plug Power set out to create a vertically integrated, end-to-end hydrogen ecosystem. The company wanted to control all aspects of the value chain, from hydrogen fuel-powered forklifts to power systems, electrolyzers to generate hydrogen, and the handling and storage of green hydrogen.

The goal was highly ambitious and expensive. From 2023 to 2025, Plug Power's net losses topped $5 billion as the company struggled with ballooning project costs, high maintenance overhead, and expensive fuel costs.

To fund its growth efforts, Plug Power has tapped equity markets numerous times. In the last five years, the company's shares outstanding have gone from 578 million to nearly 1.4 billion. In other words, if you bought the stock 10 years ago, you'd have lost over 59% of your investment from share dilution alone. Over the same period, Plug Power's stock price has plunged by 95%.

Plug Power's financial turnaround efforts are underway

Plug is pivoting away from growth-at-all-costs and leaning into its most profitable businesses while eliminating those that aren't contributing to the bottom line. With this, the company is targeting $150 million to $200 million in annual cost savings by enforcing spending discipline, streamlining operations, reducing its workforce, and focusing on its most profitable businesses.

In the second quarter, Plug Power's operating expenses dropped nearly 50% to $62 million. The company is also redesigning fuel cell stacks to use fewer parts, renegotiating contracts, cutting capital expenditures, and selling assets. In the second quarter, its gross margin improved from -31% to nearly break-even.

What's next for Plug Power

Looking forward, management aims to achieve positive earnings before interest, taxes, depreciation, amortization, and share-based expense (EBITDAS) in the fourth quarter of this year, and full profitability on a GAAP basis by 2028. Investors will want to watch Plug's third-quarter results, set to come out on Nov. 9, to see whether the company maintains cost discipline and improves margins.

That said, Plug Power has spent decades burning capital in its end-to-end hydrogen ecosystem ambitions, resulting in massive losses for investors. While the company has made some progress on Project Quantum Leap, I'd like to see further progress sustained over time before buying the stock.

Courtney Carlsen 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.