Plug Power (NASDAQ: PLUG) was one of the hottest stocks of the dot-com bubble. The provider of hydrogen charging solutions went public at a reverse split-adjusted price of $150 in October 1999 and hit a record high of $1,498 on March 10, 2000.

But today, Plug Power's stock trades at less than $3. Its investors retreated as the dot-com bubble burst, its growth slowed down, and it racked up steep losses. A delayed filing of its annual report for 2020 -- which resulted in a jarring restatement of all its financials for 2018 and 2019 -- further eroded the market's confidence in its future. So should value-seeking contrarian investors still consider Plug Power's stock to be a turnaround play?

How does Plug Power make money?

Plug Power is the world's largest single buyer of liquid hydrogen, and it's deployed more than 69,000 fuel cell systems and 250 fueling stations across the world. It also builds stationary hydrogen grid solutions for large companies and sells modular hydrogen generators, liquefaction systems, and hydrogen storage and transport equipment.

It generates most of its revenue from its hydrogen infrastructure solutions and GenDrive hydrogen fuel cell systems, which are mainly installed in electric forklifts in warehouses and fulfillment centers. Its largest GenDrive customers are Amazon and Walmart, but it subsidized its fuel cell sales to those two retail giants with stock warrants -- or options to buy more shares of the company at a discount.

That strategy gradually turned Amazon and Walmart into Plug's top investors, but it also unexpectedly backfired in 2020 when the costs of its incentives offset its customer payments. That's why Plug was forced to restate its financials for 2018, 2019, and 2020. Under the revised calculations, the company actually generated negative net revenue in all three years. But after surviving that accounting debacle, its revenue turned positive again from 2021 to 2023.

Plug Power's growth is still slowing down

Unfortunately, the company's revenue growth still decelerated over the past two years as its operating and net losses widened.

Data source: Plug Power.

Plug Power mainly blames its slowdown on the macro headwinds that drove many companies to throttle their spending on new hydrogen charging projects. However, its deceleration is even worse when we consider that it tried to offset the slowdown of its hydrogen fuel system business by acquiring two subsidiaries of Cryogenic Industrial Solutions throughout 2021 and 2022 to inorganically expand the "cryogenic equipment and other" segment.

Those acquisitions caused Plug's "cryogenic equipment and other" revenue to surge from $8 million (2% of its top line) in 2021 to $232 million (26% of its top line) in 2023, but they also compressed its operating margins. Its hydrogen fuel system sales fell from $225 million (45% of its revenue) in 2021 to $181 million (20% of its revenue) in 2023.

Its rising sales of hydrogen infrastructure solutions, electrolyzers, engineering equipment, services, and fuel deliveries couldn't offset that slowdown. CFO Paul Middleton blamed this on "chaos in the hydrogen fuel market" caused by an "unprecedented number of industry fuel facility shutdowns" during its fourth-quarter conference call in March.

Is Plug Power an undervalued growth stock?

Plug Power looked like it was in deep trouble at the end of the first quarter of 2024 when it only had $173 million in cash and equivalents on its balance sheet. But in May, it secured a new $1.66 billion loan from the U.S. Department of Energy (DOE) to build up to six green hydrogen production facilities. That loan will nearly double its total liabilities, but it should grant the company more time to expand its network of first-party hydrogen production plants and stabilize its struggling fuel cell business. It also recently raised about $200 million with a secondary stock offering, which diluted its shares by about 10%.

In 2024, analysts expect its revenue to only rise 2% to $910 million as it narrows its net loss to $833 million. But from 2024 to 2026, analysts expect Plug Power's revenue to grow at a compound annual growth rate (CAGR) of 42% to $1.84 billion as it narrows its net loss to $291 million. If it can match those optimistic estimates, then its stock seems dirt cheap at just 2 times this year's sales -- even if it dilutes its shares with more share offerings.

Unfortunately, many investors seem reluctant to give Plug Power another chance after a quarter-century of blunders and broken promises. So for now, I think investors shouldn't buy this beaten-down stock until a few more green shoots appear.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.

Should You Buy Plug Power Stock While It's Trading Below $3? was originally published by The Motley Fool