Fuel cell specialist Plug Power (NASDAQ:PLUG) has enjoyed a healthy run-up in its value recently. PLUG stock has grown over 24% in value in the past one month, spurred by management’s lofty claims at the recent Plug Symposium. However, though some seem to be buying into the company’s narrative, to me things just don’t add up.

Plug Power has consistently raised its financial projections, which points to an apparently strong outlook ahead. But the details surrounding its two main growth catalysts — electrolyzers and green hydrogen — are still uncertain. Yet, these ambitious projections have helped boost PLUG stock, gaining it momentum again.

PLUG had an incredible 2020 as investors placed their bets on futuristic and eco-friendly picks en masse. However, the stock has been remarkably volatile since the start of this year. It went as high as $75.50 in January to below $20 per share at one point in May.

All told, based on its current positioning and outlook, Plug Power now appears to be overpriced.

PLUG Stock: Guidance Increase

Plug Power’s management recently raised revenue expectations to between $825 million and $850 million. That is roughly 65% revenue growth expected for next year. Moreover, the compound annual growth rate (CAGR) from 2022 to 2025 is expected to be at 53%. Finally, the company predicts a colossal $3 billion in revenues by 2025, with gross and operating margins at 30% and 17%, respectively.

However, a look at segment revenues suggests that its core material handling business will weigh down growth rates. Its growth rates for the segment were expected to be 50%, but they may now come in at just 20% according to Seeking Alpha. These projections are in complete contrast to what was previously communicated by management.

Hence, all eyes are on Plug’s new electrolyzer and green hydrogen businesses to usher in a new era of growth. So far, though, it appears that it may take time before these bear fruit. Electrolyzer sales are falling short of expectations. Meanwhile, the company has estimated $1.5 billion in green hydrogen revenues by 2025 without having adequate visibility.

The Scope of Its Growth Drivers

Plug Power will be spending a truckload of cash to take its green hydrogen production to 500 tons per day (TPD) in the next four years. Its green hydrogen sales will replace the grey hydrogen purchased by the company, delivered to customers at sizeable losses. The company will also have to secure sufficient offtake agreements for its targeted green hydrogen production to be successful. Moreover, its margins will depend on its ability to secure cost-effective, renewable energy for hydrogen generation as well.

Furthermore, contributions from electrolyzer sales in the short term are likely to be unimpressive. Plug will be using the bulk of its next year’s production in installing its green hydrogen plants. The company plans to sell 250 megawatts (MW) of electrolyzers to Fortescue Future Industries — its Australian joint venture partner — by the second half of 2022. However, with the partnership’s production of electrolyzers expected to begin in 2023, Plug won’t really be able to recognize sales in the near term.

All told, PLUG stock has more going against it than it may first appear.

Final Words on PLUG Stock

PLUG stock has rallied as investors have bought into projections made by management. With its core material segment under duress, however, Plug Power is going to have to heavily rely on its new green hydrogen and electrolyzers moving forward.

It’s still the early days in its green hydrogen business and so far electrolyzer sales have been underwhelming. All in all, due to a lack of visibility at this stage, it’s tough for me to be excited about the company and its stock right now.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.