Looking for trillion-dollar opportunities? View the hydrogen market. This renewable fuel source could become a staple of the global economy in the coming decades. Worldwide consulting firm Deloitte believes that it will someday be a trillion dollar market. McKinsey & Co, another global consultant, predicts the demand for hydrogen to “grow considerably” in the coming years.
Plug(Nasdaq: plug) Is one of the biggest names in the hydrogen industry, and many investors bet on his large upward potential. The potential is not difficult to calculate given the meager $ 1.8 billion appreciation of the company. If the demand meets expectations in the long term, would expect to see some large hydrogen winners in 2050. But will the power be one of that? The answer may surprise you.
There is no doubt that the hydrogen market itself will grow with jumps and boundaries by 2050. That is because hydrogen is a great option for what economists are difficult to attach sectors.
Although it is relatively easy to replace coal-driven electricity with solar or wind energy, certain sectors of the economy for example cement and steel production-the high heat levels produced by burning fossil fuels. It is unlikely that existing technologies will be able to scale in a way that still supports these critical industries. That is where hydrogen technology comes into play. As DELOitte’s research concludes, “it will be difficult to occur sectors such as sectors, chemicals, aviation and shipment probably require hydrogen use worldwide to grow six -fold to almost 600 million tons, by 2050.”
When this future passes, Deloitte believes that the total hydrogen demand in 2050 will surpass $ 1.4 trillion. But the growth should pick up much earlier than that. According to estimates, the demand between now and 2030 could double, with the total market value reaching $ 642 billion.
The hydrogen market seems to be a big gamble for investors who are willing to be patient. But is Plug Power shares a good way to take advantage of this chance of several decades?
Hydrogen can indeed have a huge long -term promise. But investing in the industry is a much different challenge. The situation is very similar to other capital -intensive, renewable energy companies such as electric vehicles. Although some companies like it Tesla His prosperous, countless other startups have gone bankrupt. The same will probably be true for hydrogen. Building the necessary infrastructure requires billions in financing, and there is no guarantee that the technology of a company will win.
The history of Plug Power in the last 20 years paints this photo well. The sale has been picked up and frees it to spend more on research and development. Yet in the long term, the share has been a terrible investment. That is largely due to the sharing of dilution. During the past two decades, the number of shares of the Power has been expanded with an amazing 9,950%!
Plug Research and Development Data (TTM) data by YCHARTS
This is the most important problem with plug power today. The demand of hydrogen will almost certainly increase in the coming decades, although the exact scale and speed of that growth will remain very uncertain. But plug capacity remains needed billions in new capital to remain competitive. Although it has so far survived about the dilution of shares and government subsidies, so that it can gradually expand its sales basis, losses have taken away possible profit for shareholders.
This issue – that market growth simply occurs too slowly for shareholders to win – will not disappear quickly. Goldman Sachs recently estimated that plug capacity has a sharing time of 25.8 years. That figure intends to capture the weighted average of the expected cash flows of the company. In a sense, Plug Power shares are such as buying a bond that has not been mature for several decades, making the share price very sensitive to changes in interest rates and shifts in the competitive climate. For example, plug capacity can make billions in its technical pile of casting for a competitor to catch up with a new production method for cheap costs.
Could plug capacity become a trillion dollar stock by 2050? The answer is almost certainly no. The total market size in 2050 will only reach around $ 1.4 trillion. And which companies or technologies will win is currently impossible to know. The only thing we know is that investments in competing technologies are rising, just as the research and development budget of Plug Power is starting to stagnate.
In 2023, Plug Power received a notification from Goight Concern from its accountants, warning for potential insolvency if it has not discussed new capital. This financial stress will not disappear quickly and the further revenue growth will probably be canceled by more share dilution. For the time being, plug power seems to be ready to survive and potentially become a larger player in the wider hydrogen market. But investors – even those who are willing to accept more risk of more returns – have to look somewhere else.
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Ryan Vanzo has no position in one of the aforementioned shares. The Motley Fool has positions and recommends Tesla. The Motley Fool has a disclosure policy.
Will plug capacity be a trillion dollar stock by 2050? was originally published by the Motley Fool
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