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The possibility of a climate agreement in Washington sent shares of the hydrogen producer Plug hole (NASDAQ:PLUG) up 20% so far this morning. However, PLUG stock is still down more than 25% on the year.
The action has been skewed by recurring negotiations in the US Senate over climate funds and energy security. The latest movement brings it right up to its mid-May level.
Even at this price, Plug Power is highly valued. It had $500 million in revenue in 2021 and no profit, but it sports a market capitalization of $12 billion.
Hope springs for PLUG Stock
Plug Power’s valuation is based on the hope of “green hydrogen”. It uses raw materials from olin (NYSE:OLN) chlorine and caustic soda plants from brine by electrolysis. Plug Power captures, transports and sells this hydrogen for use in fuel cells. Fuel cells are used by utilities for backup power and by warehouse forklifts for sustainable, emission-free transportation.
Plug Power claims huge orders and boasts a large order book. But it also faces a lawsuit from an investor claiming management mislabeled research fuel delivery costs and engaged in insider selling.
The stock hasn’t been a great investment either. It was unable to sustain speculative rises in early and late 2021. It is still trading at its November 2020 level. This is thanks to huge secondary equity offerings, made when the price peaked. These allowed it to buy Frames Group and Cryo Engineering, thus completing its electrolyzer and hydrogen product lines.
What happens next?
The possibility of a climate bill does not change the fundamentals of Plug Power. It is still not profitable and will likely remain so when it releases its next results on August 4.
But with more than $3 billion in cash, much of it coming from these secondary stock offerings, PLUG stocks have a chance to succeed or fail on their own terms.
As of the date of publication, Dana Blankenhorn did not hold any positions at the companies mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
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