So, are hydrogen fuel cells finally ready for prime time?

Shares of fuel cell maker Plug Power Inc. (Nasdaq:PLUG) soared over 50% after it was announced on October 22 the company had received a purchase order from Wal-Mart (NYSE:WMT) for fuel cells to be used in Wal-Mart's fleet of fork lift trucks. (For all the details, see the press release.)

While traders pared back the gain to only about half that amount by the close, it was still an impressive show of strength for a sector that's been long on promise and short on meaningful results for some time now.

Profitability Soon To Come?
While the eventual destination for fuel cells is under the hood of your car, there are a lot of baby steps that need to be taken before that happens. And one of these is proving the technical and commercial viability of fuel cells in relatively less demanding applications, such as fork lifts.

While on the face of it, Wal-Mart's order represents a huge vote of confidence in the technology, it may not give Plug the profit boost that investors seem to be betting on. Consensus EPS estimates are projecting a loss of 64 cents per share this year and 57 cents for 2008. During the second quarter of 2007, Plug reported a loss of 19 cents per share compared to analyst expectations of a loss of 13 cents. (To learn more, see Small Cap Research Can Have Big Impact.)

Competition Exists Even In This Niche Market
Plug isn't the sole player in the "fuel cells for fork lifts" market. Competitor Hydrogenics (Nasdaq:HYGS) is also hoping for its big breakthrough order. Back in June of 2007, Hydrogenics announced it had secured trial orders from some of the top forklift original equipment manufacturers, with each order consisting of 10 to 20 units.

Last year, Hydrogenics had $30 million in revenues compared with only $7.8 million for Plug. Like Plug, Hydrogenics is also expected to generate losses this year and next as well, but of a smaller per-share amount than Plug Power. Incidentally, Hydrogenics shares hardly budged on the day that the Plug-Wal-Mart deal was announced.

The Bottom Line
No doubt, Plug shares got a little ahead of themselves on the news of the company's recent press release. This is somewhat to be expected, given the impact that a name like Wal-Mart can have on investors, especially investors in a small-cap company such as Plug Power. Expect some volatility for the shares in the days ahead - the company's recent successes are a good start, but it, and fuel-cell technology as a whole, still have a long way to go before it is ready for the big time.

For more on earning some green(backs) while going green, read Clean Or Green Investing.

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