Why Plug Power Stock Is Soaring Today

Key Points

• Plug Power announced a new deal that will provide the company with fuel at a reduced rate.

• The company believes the "big, beautiful bill" (now law) will help its business.

• Plug Power continues to struggle with stagnant sales and significant cash burn.

• 10 stocks we like better than Plug Power ›

Shares of Plug Power (NASDAQ: PLUG) jumped on Wednesday, up 24.7% as of 2:14 p.m. ET. The spike comes as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) were up 0.4% and 0.6%, respectively.

Plug gets better terms

The hydrogen power company announced today it has secured a multiyear extension to a key contract. The deal will see an unnamed partner continue to supply Plug Power with hydrogen through 2030. Critically, the new deal is more favorable financially, reducing overall cost to Plug Power and improving cash flows. The news is an important step toward stability, as Plug Power continues to burn cash.

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As part of the announcement, Plug Power indicated that the new terms were made possible in part by the passage of the "big, beautiful bill," saying:

This legislation will provide strong tailwinds in the near and mid-term for additional market growth. Plug's expanded agreement with this partner highlights how strong U.S.-based industrial partnerships are advancing a domestic hydrogen economy to support this ongoing growth.

Image source: Getty Images.

Plug Power is not in a good position

Despite the news, investors should know that Plug's financials are in dire shape. The company's sales have stagnated and even declined for some time -- with the notable exception of last quarter -- and it is operating at a loss. Its cash burn is not sustainable.

For investors with a high risk tolerance and the ability to lose their entire allocation, Plug Power could be a high-risk, high-reward speculative turnaround play. However, I would caution most investors to stay away.

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Johnny Rice 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.