Plug Power’s stock veers between gains and losses as investors seek ‘clarity’

The stock has lost more than 70% so far this year, contrasting with gains of around 15% for the S&P 500
SPX.
The 2023 loss would be a third consecutive double-digit yearly loss for the stock, once a Wall Street wonder that rose more than 900% in 2020.

Plug Power last week unveiled a slew of bad news for investors, starting with a quarterly loss and a guidance withdrawal due to a “severe” hydrogen shortage.

Tucked in a regulatory filing, the company also had the going-concern warning, saying it had an accumulated a deficit of $3.8 billion as of Sept. 30.

Plug Power “has continued to experience negative cash flows from operations and net losses,” the warning continued.

Net losses have piled up, and Plug Power “expects to generate operating losses for the foreseeable future as it continues to devote significant resources to expand its current production and manufacturing capacity, construct hydrogen plants and fund the acquisition of additional inventory to deliver our end-products and related services..”

JPMorgan analysts downgraded their rating on the stock to the equivalent of hold from buy, saying that the third-quarter earnings “illustrated numerous near-term challenges the company is facing.”

“Once armed with a pristine balance sheet after raising meaningful capital, Plug’s short-term cash has been whittled down as a result of operational and scaling up challenges and an unfavorable hydrogen supply environment,” the JPMorgan analysts said in their recent note.

“This has led to significant margin challenges and higher-than-expected cash burn,” they said.

The company “can cycle past its current cash-flow issues,” they said, but “the current operating and capital markets environments are challenging and we believe [Plug Power] shares are likely to be rangebound over the next several quarters until clarity around its balance sheet is sorted out.”

Plug Power told investors it will tap capital markets and seek Energy Department loans to shore up its finances.

“Previous examples of DOE funding are normally 6 months from contingency to approval,” so its investors will have to provide “critical near-term funding,” analysts at Jefferies said in a note.

Truist analysts lowered their price target on the stock to $6 from $8 and reiterated their hold rating on the shares. Plug Power “is feeling the pain of attempting to scale up multiple hydrogen-fueled segments in a heavily hydrogen-constrained market to the impediment of margins/cash flows,” they said.

Evercore ISI analysts sounded a little more optimistic about Plug Power’s prospects. The Energy Department loan is expected to be approved and disbursed to Plug Power over the next few quarters, “which should alleviate cash concerns,” they said.

In the longer term, “the green hydrogen economy is coming close to reality as favorable government legislation … continues to provide tailwinds,” they said.

“We anticipate Plug to meaningfully expand margins as production plants ramp up, green hydrogen production costs decline, and the company begins monetizing” tax credits, they said, keeping their rating on the stock at the equivalent of buy.