Wall Street Got It Wrong About Plug Power. Here's Why.

The stock of hydrogen fuel developer Plug Power (NASDAQ: PLUG) has been a bumpy ride. But since the start of 2021, that ride has been consistently lower. Back then, the stock was valued as high as $70 per share. Today, the share price is below $3.

Wall Street has been consistently wrong about where the stock price is headed next. In 2021, right before shares collapsed, nearly a dozen firms had a buy rating on the stock.

Wall Street expectations have come down sharply since those highs, but the average price target remains at nearly $5 per share -- more than double the current share price. Could analysts finally be right? Is now the time to bet big on Plug Power? The answer might surprise you. (NYSE: GS)

This is why Wall Street can't predict Plug

One of the biggest reasons why Wall Street has struggled to accurately predict the direction of Plug Power stock is that its cash flow inflection point could be years, if not decades, into the future. Goldman Sachs analysts have specifically called the company out for its distant cash flow projections . According to those analysts, Plug Power has an equity duration of 25.8 years. That means that the weighted average of the company's expected cash flows is around 26 years. Take note that a bond of similar duration would be considered very long-term.

Because Wall Street often uses a discounted cash flow model to value a company, they must estimate and then discount projected cash flows back to the present. The more distant a cash flow is, the more sensitive it is to changes in assumptions.

Barring a sudden change in regulatory policy, it's likely that hydrogen fuel cell demand won't reach its biggest inflection point until 2030 at the earliest. As global consultancy McKinsey recently concluded, "Global clean hydrogen demand is projected to grow significantly to 2050, but infrastructure scale-up and technology advancements are needed to meet projected demand." These infrastructure gaps will take many years to resolve. Until then, Plug Power will likely be spending billions in capital expenditures despite operating a money-losing business. Over the last year, for example, the company has spent between $100 million and $200 million per quarter building new plants and other infrastructure required for growth. Yet over that time period, net losses totaled well over $1 billion -- more than half of the company's entire market cap today.

This all adds up to why Wall Street has been so wrong about Plug Power over the years. Analysts were required to project cash flows that were far into the future. With mounting losses, increased competition, and higher interest rates, these projected cash flows have been pushed out even further into the future, having an outsized negative effect on the share price.

Can Plug Power stock really rise by 130%?

There's one important question to ask right now: Is this time different? The average one-year price target for Plug Power stock right now is $4.91. That's around 130% higher than the current stock price. But it's important to know that there's a huge variance between predictions. One price target, for instance, is nearly $19 per share, while others are as low as $1.52 per share.

Can Plug Power stock actually rise by 130%? It's doubtful. All of the pressures that led to the company's share price collapse in recent years persist to this day. In fact, they may be stronger than ever before. While new regulations and incentives are growing more accommodating for hydrogen demand growth, it's clear that a potential transition would still take decades. The economics and infrastructure to scale clear hydrogen fuel simply aren't in place yet. Meanwhile, Plug Power's financial resources continue to dwindle. Last year, the company's auditors issued a going concern notice, indicating that insolvency was imminent if drastic measures weren't taken. Plug Power addressed those concerns by massively diluting shareholders, something it continued to do in recent quarters.

Plug Power is simply between a rock and a hard place right now. Its persistent losses force it to continually tap the debt and equity markets. Yet positive cash flows remain many years away. This limits its ability to invest in new innovation, allowing competitors to develop newer, cheaper, more efficient solutions. Wise investors should stick to the sidelines for now.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and JPMorgan Chase. The Motley Fool has a disclosure policy .