What happened
Shares of hydrogen fuel company Plug Power (PLUG +3.57%) have been steadily sinking this week. As of Friday midmorning, Plug stock had lost 17% compared to its closing price last Friday, according to data provided by S&P Global Market Intelligence.
NASDAQ: PLUG
Key Data Points
So what
The company itself didn't provide any news releases this week. Instead, it has been a story of interest rates. The benchmark 10-year Treasury yield jumped this week. The 5- and 10-year notes, along with 30-year bonds, are at the highest levels since August 2007.
The result was a stampede out of stocks of renewable energy companies like Plug Power. Even shares of profitable, dividend-paying companies like NextEra Energy are down nearly 20% on the week. That's because the capital needed to build out these renewable energy businesses just got more expensive.
Now what
Plug Power neither makes a profit nor pays a dividend. Even with record revenue of more than $700 million in 2022, Plug reported a net loss for the year of about $725 million, or $1.25 per share. That trend continued through the first half of 2023, with Plug's operating losses reaching more than $440 million over the six months ended June 30.
The good news for the company is that it still had $580 million in cash and cash equivalents on its balance sheet as of June 30. But Plug will still need to continue spending while its green hydrogen production plants in Georgia, Tennessee, Louisiana, and Texas ramp up to full capacity.
In the meantime, Plug has to purchase hydrogen from industrial gas companies. Additionally, the company continues work toward commissioning a facility in New York next year.
Investors can get meaningful returns by investing in bonds with yields at recent levels. They don't want investments sitting in stock of a company for which costs are rising and profitability is not yet in sight. That likely won't change until those interest rates come down and Plug Power's business is further along.
