What happened
Shares of hydrogen fuel cell star Plug Power (PLUG +4.02%) is notching its second straight day of gains on Wednesday, nearly doubling Tuesday's 2% gain as of 11 a.m. ET on Wednesday -- up 3.7%.
And you can thank The Wall Street Journal for that.
NASDAQ: PLUG
Key Data Points
So what
In an article that came out over the holiday weekend, WSJ profiled Plug Power CEO Andy Marsh's 14-year effort to turn his company profitable. (In fact, S&P Global Market Intelligence data show that Plug hasn't earned a profit since it set up shop in 1997 -- 26 years ago -- but Marsh has only been CEO since 2008.) But while Marsh hasn't been able to reverse this 26-year trek toward increasing losses yet, the Journal had good news for investors in the fuel cell company:
Congress packed the ... Inflation Reduction Act, with goodies meant to urge American production of renewable energy and its technology. Few companies have more to gain than Plug Power from the government cash.
Here's how the math works: Currently, hydrogen fuel separated from natural gas costs about $1.50 per kilogram to produce. Green hydrogen -- which Plug wants to manufacture and sell by separating hydrogen from water using electricity from solar and wind power -- costs $5 per kilogram and up.
Plug's plan is to produce green hydrogen for $5 (or lower), sell it for $6 a kilogram, and pocket not just that $1-per-kilogram profit, but also $3 per kilogram in tax credits from the IRA. Even if the retail price of green hydrogen falls, WSJ calculates that the product could become "more than twice as profitable" for Plug. And that's on top of any profits the company can earn from building and selling the fuel cells that will use the hydrogen fuel.
Now what
Add in predictions that the global market for hydrogen fuel will "more than triple by 2050" -- and that almost all of this increase will be in the production of green hydrogen -- and you can see why investors are happy with the Journal article on Plug Power.
Now, the bad news is that despite all this good news, most analysts polled by S&P Global Market Intelligence still don't see Plug Power earning a profit before 2025 at the earliest, or generating positive free cash flow before 2026. What's more, at current prices, Plug Power stock costs more than 45 times the profit that it might earn (or might not earn) in 2025.
Granted, if Plug turns profitable in two years, the likelihood that it will fulfill analyst predictions of doubling earnings in 2026 and beyond should increase. But let's see if the company can earn that first profit before we go musing about how fast it can grow its profits, OK? First things first.
