Why Plug Power Popped 97% in 2017

What happened

Plug Power (NASDAQ: PLUG), a leader in fuel-cell solutions, climbed 97% higher in 2017, according to data from S&P Global Market Intelligence. Besides the announcement of a deal with Amazon.com, investors found renewed confidence in the expansion of a relationship with Wal-Mart following a large stock purchase from one of the company's insiders.

So what

Deeming the deployment of Plug Power's fuel-cell solution at one of its warehouses in Q4 2016 a success, Amazon decided to further incorporate Plug Power's hydrogen solutions at its various fulfillment centers. According to Plug Power's press release in early April, the agreement would contribute about $70 million to its top line in fiscal 2017 and $600 million overall. This, however, means little without some context, so consider the following: Plug Power's fiscal 2016 revenue totaled $86 million, and the company reported a combined $400 million in revenue over the past 10 years, according to Morningstar.

Besides the Amazon deal, investors celebrated Plug Power's new agreement with its long-standing customer, Wal-Mart, for whom it has deployed a new site every six weeks since 2014. According to the recently signed deal, Plug Power will provide its hydrogen-based power solutions to up to 30 Walmart sites in North America over the next three years. The deal is expected to yield about $80 million in revenue for fiscal 2017, and it has the potential to provide up to $600 million to Plug Power's top line overall.

Exciting announcements weren't the only source of enthusiasm in 2017, though. In what investors interpreted as an auspicious sign, Plug Power's chairman, George McNamee, shelled out about $426,000 to purchase 200,000 shares of the company's stock, raising his personal stake in the company by 36%. Although there are numerous reasons for insiders to sell stock, the only reason they would purchase shares, presumably, is if they believed the stock was headed higher. It's understandable, therefore, why the market took notice of McNamee's acquisition -- one in which he paid about $2.13 per share -- since Plug Power was trading near its 52-week high.

Now what

For fuel-cell companies, the announcements of major deals are nothing new; consequently, their appearance should be taken in stride and should not interpreted as an assurance of the company's success. With the signing of great deals comes great responsibility -- responsibility to satisfy the terms of the newly inked agreements. That has represented a challenge for Plug Power in 2017. In its Q3 earnings report, management noted that the company suffered from "operational inefficiencies" in its effort to ramp up production. As a result, management foresees a fiscal 2017 adjusted gross margin of 5% to 6%, a drop from the initial forecast of 8% to 12%.

Since blockbuster deals and large insider purchases alone do not a sound investment make, only the most risk-tolerant investors should be willing to consider Plug Power's stock.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Scott Levine has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.