In 2021, unprofitable companies with remarkable growth profiles really outperformed, for companies that had a story. Plug Power (NASDAQ:PLUG) had a story, and PLUG stock soared higher.

In 2023, investors need to see black ink on the bottom line. Plug Power revenue grew 40% last year, but that’s not good enough for many investors, given $1.27 went out the door for every $1 that came in.

To its credit, management recognizes this. Losses are expected to narrow significantly when the company reports its first quarter numbers on May 8. Notably, analysts expect a profit by the third quarter. Additionally, analysts estimate the intrinsic value of Plug Power as 78% higher than the current stock price. But whether it reaches that value depends on events outside its control.

Interest Rate Slowdown

In theory, Plug Power has a great business that’s also great for the planet. Hydrogen can be commercially extracted from alkali pools using renewable energy, and it can run warehouse forklifts for much longer than conventional batteries. Combining hydrogen gas and oxygen results in energy and water, so you have a virtuous cycle without using carbon.

The story sounds incredible. Plug Power hopes to sell $5 billion of hydrogen annually by 2027. But that requires capital, and as capital costs have increased, Plug Power has been forced to slow its spending.

Plug Power needs scale to operate profitably, so the Federal Reserve’s recent interest rate hikes have come at the wrong time. The company had a net loss of $724 million last year, amounting to $1.25 per share. That’s 51% more than it lost in 2021, when interest rates were much lower.

Analysts looking for the company to turn the corner on profitability are walking away in disappointment. The stock is already down roughly 24% in 2023, and Morgan Stanley (NYSE:MS) recently cut its price target on PLUG stock from $35 per share to $15. While still higher than where the stock is trading at now (around $9 per share), that’s quite the target price reduction.

Finding Hope

Falling interest rates can be the rising tide that lifts all capital-intensive boats, including those in the renewable energy sector. Accordingly, the fall in two-year T-Bills last month, from over 5% to less than 4%, seemed to offer hope. But things have reversed in April, with the 2-year now trading at 4.18% at the time of writing.

Plug Power is now seeking help from the federal government, and New York, where it is building a fuel cell plant called a “gigafactory” near Rochester. The company claims it can be the heart of a “hydrogen hub” if its alliance, which includes Cummins (NYSE:CMI), the $33 billion industrial machinery company, can get $1.6 billion in federal aid. Plug Power also says that, with subsidies, “green” hydrogen can be cost competitive with hydrogen that is derived from natural gas.

While excitement in 2022 revolved around hydrogen fuel, investors are now increasingly focusing on the fuel cells using that hydrogen. Plug Power primarily focuses on forklifts, since they run indoors and get more range with fuel cells than batteries.

The Bottom Line

Plug Power needs government support to get over the hump of high-interest rates. Until that help arrives, it will be a dicey investment.

This isn’t unusual. Most of America’s renewable energy companies have been horrible investments, except when money was free, and growth prized above all.

Until help arrives, it’s hard to recommend Plug Power, which now sells for about eight times its revenue, shows no profit, and will have to stop growing to earn any money later this year.

Creating a virtuous cycle around green hydrogen, and expanding its market beyond forklifts, will take more capital than the market is willing to give Plug Power right now. Unfortunately, that means that PLUG stock is likely too risky of a bet to make, until rates start coming in a meaningful fashion.

On the date of publication, Dana Blankenhorn held no position in any company mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.