Why Plug Power Inc.'s Shares Popped in July (and Dropped in August)

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What happened 

Shares of Plug Power Inc. (NASDAQ: PLUG) jumped 10.8% in July, according to data from S&P Global Market Intelligence, after the company announced an expanded agreement with Wal-Mart (NYSE: WMT). The only problem is, nearly all of the month's gains were lost once Plug Power announced earnings.

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So what 

The Wal-Mart deal has Plug Power installing as many as 30 additional GenKey and fuel-cell systems at Walmart stores in North America. And it comes with commitments to spend $80 million in 2017 and potentially $600 million over the course of the agreement. To get the deal, Plug Power gave Wal-Mart 55,286,696 shares worth of warrants, which will vest at every $50 million increment until reaching $600 million.

This is similar to the deal Plug Power signed with Amazon.com (NASDAQ: AMZN), which also came with warrants, effectively diluting any upside if these agreements end up being profitable.

What sank shares of Plug Power this week was its earnings report, which is much more consequential than the Amazon or Wal-Mart deals. The company saw revenue barely increase to $20.8 million and reported a loss of $42.6 million, or $0.10 per share on an adjusted basis. Analysts were expecting $28.6 million in revenue and a $0.06-per-share loss, so financials were a lot worse than most traders were expecting.

Now what 

Plug Power has been known to make big announcements signing customers to contracts, but it has never proved its ability to make money. Along the way, it has had to issue shares, diluting shareholders, something it has done again with the Wal-Mart and Amazon deals. Until Plug Power proves its ability to make money, I'm staying far away from this stock, and the poor earnings report gives another example of why I don't think we can trust management's rosy outlook on the business.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.