It has been an incredible run for Plug Power (PLUG +1.14%), a popular hydrogen stock. Over the past 12 months, shares have increased in value by an astounding 296%.
This impressive performance isn't due to chance. There are some real positive tailwinds behind the company right now, everything from improving financials to growing AI exposure.
But can Plug Power continue its run over the next 12 months? The company's market cap remains at just $4.4 billion, even after the latest stock price surge. The potential for hydrogen fuel to power key sectors of the global economy also remains lucrative. In fact, Goldman Sachs previously estimated that hydrogen fuel is a $12 trillion opportunity over the next two to three decades.
Before you jump in, however, there's one important factor to consider that may weigh heavily on Plug Power's stock price over the next 12 months.
NASDAQ: PLUG
Key Data Points
Hydrogen fuel is clearly a multi-trillion-dollar opportunity
There's no doubt that hydrogen fuel can help decarbonize many pillars of the global economy -- everything from aviation to steelmaking.
A Goldman Sachs report concludes: "Hydrogen has both flexibility and a high specific energy per unit mass -- two attributes that make it uniquely capable at removing emissions from the harder-to-decarbonize parts of the global economy." It also says: "The clean hydrogen industry is scaling up not just in the number of projects planned, but also in the average size of them. The research team estimates that the average project will increase more than 600 times from the current dimensions."
There's just one problem: Hydrogen fuel systems simply can't compete on cost versus conventional systems running on fossil fuels, or even other renewables like wind and solar. Indeed, much of Goldman Sachs' rosy outlook for hydrogen is based on heavy government regulations around the world, which would either subsidize hydrogen systems to lower their upfront and ongoing operating costs, or increase the price of competing fuel sources through additional taxes.
Image source: Getty Images.
What would it take to unlock the next phase of hydrogen growth? Recent research from the International Energy Agency concludes that "projects will depend on policy action to address key barriers, particularly support for closing the cost gap with hydrogen from unabated fossil fuels."
Hydrogen fuel is a multi-trillion-dollar market opportunity. But companies like Plug Power that design and market these systems aren't necessarily in control of their own destiny. They will continue to rely on government subsidies or regulatory action to grow their project pipelines, with a major inflection point in hydrogen fuel adoption perhaps years, or even decades, away, barring swift changes to prevailing government policies. There's a reason why Elon Musk has historically been bearish on hydrogen fuel.
What does that mean for Plug Power over the next 12 months? Who knows? Short-term stock market swings are notoriously difficult to predict accurately. The company's stock price seems to be benefiting from narrowed losses last quarter, plus potential demand tailwinds from the AI sector, which may prove less cost-conscious. But Plug Power's future simply isn't within its control, and that's keeping me on the sidelines, despite the company's impressive run over the last year.
