Key Points

  • Plug Power is growing sales and reducing cash burn.

  • The long-term future of hydrogen fuel remains in doubt.

  • These 10 stocks could mint the next wave of millionaires ›

Wall Street is generally upbeat on Plug Power (NASDAQ: PLUG), a popular hydrogen stock. The average price target is currently $3.20, implying nearly 60% in potential upside.

Some analysts are even more bullish. Jason Tilchen of Canaccord Genuity is projecting 97% in near-term upside. Craig Irwin, an analyst at Roth MKM, believes 147% in upside is possible. Meanwhile, Amit Dayal of H.C. Wainwright predicts an impressive 246% growth potential for Plug Power stock.

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Despite rosy projections from Wall Street, I'm still not buying Plug Power stock. And there's one major reason why.

Here's why I'm not buying Plug Power stock

Hydrogen fuel is getting renewed attention, given the AI industry's rapidly increasing energy needs. To scale AI adoption, more energy-intensive data center infrastructure will be needed. The current grid isn't suited for this sudden and sustained spike in energy demand. In response, Plug Power is positioning itself as a solution. Here's what the company said in a July blog post:

As AI demand grows, power grids are struggling to keep up. Hydrogen steps in to help when the grid is under pressure. Hydrogen production systems can quickly adjust how much energy they make based on real-time needs. This helps reduce power costs and prevent blackouts. It's not just about clean energy anymore. Hydrogen has become a smart and flexible way to manage rising energy demands.

Plug Power has already been able to close several deals with data center operators. And rising demand for the company's GenEco electrolyzers across other industries is fueling sustained revenue growth in recent quarters, as well as a sizable improvement in gross margin. Analysts project 15.4% sales growth for 2026, with another 18.3% growth expected in 2027.

Everything looks to be heading in the right direction for Plug Power. Sales are growing, margins are improving, structural demand tailwinds are building, and Wall Street remains rosy about the stock's prospects. Why, then, am I still not buying Plug Power stock? For one reason: I haven't yet bought into the hydrogen economy.

"In almost every corner of the globe, there is an emerging overlap of business interests and political ambitions that strongly favors this development of hydrogen and hydrogen derivatives as a carrier of low-carbon energy," observes a report from S&P Global (NYSE: SPGI). "But the challenges ... cost and scale, planning bottlenecks, defining rules for what is 'green' and lining up customers willing to commit to a product at a premium cost ... mean that the transition to hydrogen is unlikely to happen at a speed and scale to transform the business environment."

In other words, hydrogen fuel has a long way to go until it's truly competitive with conventional fuels. As S&P Global points out, hydrogen fuel still isn't cost-competitive with alternatives. And while alternatives such as fossil fuels and renewable electricity have already achieved a level of mass scale, hydrogen's infrastructure remains far behind. These two challenges alone have repeatedly pressured predictions for long-term hydrogen fuel demand.

"A wave of cancellations, cost pressures and policy uncertainty have thinned the low-emissions hydrogen project pipeline and cut 2030 projected development by nearly a quarter," warned Reuters last year after the International Energy Agency released its new forecast. Lower-than-expected growth for the industry has been the norm for more than two decades.

Even if Plug Power has improved its own operations in recent quarters, it's still competing in an industry where the odds are stacked against it. That's largely why, despite the slew of good news, Plug Power stock remains down 10% year to date.

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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.