With shares up by around 200% over the past six months, Plug Power (NASDAQ: PLUG) might look as though it's on a path to recover from its long-term slump. Investors are seemingly more optimistic about its green hydrogen fuel cells -- a technology that promises to offer a virtually limitless supply of clean energy to help businesses reduce their reliance on carbon-emitting fuels.

However, anyone who has watched the stock market for a while knows that speculative rallies rarely stand the test of time if they aren't backed by strong fundamentals. And in the case of Plug Power, this recovery was coming from near the bottom of a slide that took it to a more than 10-year low in May. So what might the next five years bring for the stock?

A fallen star

Based on Plug Power's stock price of just $2.70 today, it would be easy to assume that it's a small start-up early in its efforts to make a name for itself. But that's not the case. The company hit the market through an initial public offering at $15 a share all the way back in 1999, and rocketed to an all-time high of $1,498 the following year during the dot-com bubble.

Its subsequent declines took it back below its IPO price in 2001, and it has never gotten back to that level since. Indeed, it sank so far over the years that in 2011, management had to conduct a 1-for-10 reverse stock split. In short, the stock's recent rally to around $2.70 pales in comparison to the amount of value it has lost over the years.

In principle, it might be hard to imagine why such a company would be failing. After all, hydrogen fuel technology sounds like a compelling opportunity. Not only is hydrogen the most abundant element in the universe, but when used as fuel, it leaves only water as a waste product. Plug Power's goal is to produce and deliver commercially viable quantities of hydrogen fuel without using polluting energy sources in the process of extracting it (green hydrogen).

However, while green hydrogen sounds exciting and potentially beneficial for the environment, that isn't necessarily enough to create a sustainable business. While some mainstream companies like Walmart are experimenting with the technology to power their warehouse forklifts, hydrogen fuel cells have struggled to achieve mainstream adoption because of challenges like high production costs and transportation difficulties.

Consistently weak fundamentals

While experimental pilot programs make for great headlines, they can only take a company so far. And the lack of widespread commercial adoption of hydrogen fuel technology has severely limited Plug Power's operational performance. The company's second-quarter earnings report left much to be desired.

While net revenue grew by a respectable 21% year over year to $174 million, the company reported a gross loss of $53.5 million, which means it is still costing it more to manufacture and deliver its products than it's recouping by selling them. That's a bad situation for any business.

Image source: Getty Images.

If there is any silver lining to that situation, it is that Plug Power's gross loss was much lower than the $131.3 million loss it posted in 2024's second quarter. But sustainable profitability is clearly still years or even decades away.

Furthermore, the company seems to have a bloated overhead budget. It spent a whopping $87.9 million on selling, general, and administrative expenses in the quarter compared to just $12.2 million on research and development. Those budget numbers don't look like they reflect the correct priorities for a company that is trying to pioneer a new and highly experimental technology.

Given that it has just $140.7 million in cash and equivalents on its balance sheet, investors should expect Plug Power to engage in further equity dilution to raise the money it will require to maintain its operations. Most recently, the company raised $370 million through the sale of warrants that give the buyer the right to purchase new units of stock. Such transactions reduce earlier investors' ownership claims on the company and whatever profits it might earn in the future.

Avoid Plug Power

While the potential for hydrogen fuel cell technology is exciting, Plug Power doesn't look like the right way to bet on it. The company has consistently generated losses for decades. And to make matters worse, it is diluting its shareholders to pay for office salaries rather than to fund the much-needed research that could help it win mainstream acceptance for its technology platform. Shares look set to underperform over the next five years and beyond.

Will Ebiefung 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.