1 Reason I'm Still Keeping an Eye on Plug Power Stock, Despite Recent Lows

Key Points

• Plug Power is finally reining in its spending aimed at developing a hydrogen economy.

• Plug is growing revenue through sales of its fuel cell and electrolyzer platforms.

• One fuel cell peer has paved the way for Plug to grow its business even further, too.

• 10 stocks we like better than Plug Power ›

Plug Power (NASDAQ: PLUG) stock hasn't been a winning investment. Shares of the hydrogen-based energy company plummeted 94% over the last three years, including a 27% decline year to date.

Yet some investors are still betting on a turnaround, and the stock has rebounded over the last several months from an all-time low price. The reason for that recent bounce is also why I am still keeping an eye on Plug Power.

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A solution for data centers

Plug Power made an ambitious push into utilizing hydrogen as a fuel. Perhaps it's been too ambitious, as it poured money into building hydrogen production facilities and other hydrogen infrastructure. But it does now have a growth engine for the business with its fuel cells and electrolyzers.

The company has reduced its capital spending, with operating and investing cash usage down by 40% year over year in the second quarter. At the same time, Q2 revenue jumped by 21%. Orders for its fuel cells and electrolyzer platforms are the reason for that. Electrolyzer sales tripled year over year and represented 25% of total revenue in Q2.

There might be much more to come. Fuel cell peer Bloom Energy is showing investors how that path might look. Bloom recently announced a deal to deploy its fuel cell technology at some of tech giant Oracle's cloud infrastructure data centers in the U.S. Data center growth is exploding, creating an increasing need for energy. Rather than taxing electrical grids, local fuel cells are one solution to that need.

Many data center owners also want to utilize renewable energy where possible. That's where Plug Power can become a big player. Investors need to watch for similar announcements of partnerships between Plug and large tech companies. If Plug Power can ink contracts to supply power to data centers, it could reverse its fortunes and become a winning investment moving forward.

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Howard Smith has positions in Bloom Energy. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.