Plug Power's stock plummets, as Wall Street can no longer wait for the bottom

By Tomi Kilgore

It's become prudent to stop recommend buying Plug's stock until the expected improvement actually starts taking place, analyst says

Shares of Plug Power Inc. plummeted toward their worst day in more than nine years on Friday, after another disappointing quarterly report prompted some analysts to bag their bullish calls until there are actual signs of a bottom for the company developing hydrogen fuel cell systems to replace conventional batteries in equipment and vehicles powered by electricity.

"Management expressed confidence in executing a liquidity transaction near-term and continues to see a path for margin improvement through next year," RBC Capital analyst Chris Dendrinos wrote in a note to clients. "However, at this time we think it prudent to move to the sidelines and await execution of these events and until we see more material progress on initiatives to reduce the cash burn and improve margins."

Dendrinos cut this rating on Plug's stock (PLUG) to sector perform, after being at outperform for at least the past two years. The price target was slashed to $5 from $12.

Plug's stock was rocked for a 37.4% loss in premarket trading, to put them on track to open at the lowest price seen during regular-session hours since April 2020. The stock was also headed for the worst one-day performance since the 41.5% plunge on March 11, 2014.

The company reported late Thursday a wider-than-expected third-quarter loss and revenue that missed forecasts, citing "unprecedented supply challenges." That marked the 13th straight quarter that losses were wider than Wall Street projected, according to FactSet.

Oppenheimer analyst Colin Rusch, who had been bullish on Plug's stock for at least the past three years, cut his rating to perform.

"While we believe Plug has numerous options for augmenting its balance sheet and will reduce working capital, the compounding effect of lack of hydrogen availability on equipment sell-through may take a couple of quarters to work through," Rusch wrote.

"We expect management to work through all of these issues successfully, but believe shares will likely be challenged until working capital normalizes, [gross margin] turns positive, and trajectory on growth is derisked," Rusch added.

Basically, Rusch and RBC's Dendrinos still believe in the company, they just can't keep recommending investors own the stock until promise become reality.

Even with their downgrades, and the dismal performance of the stock, most of Wall Street remained bullish.

Of the 31 analysts surveyed by FactSet 17 are still bullish, while the other 14 are neutral. Although the stock has plunged 52.1% year to date, even before Friday's selloff, after tumbling 56.2% in 2022, there are no bears.

In comparison, the S&P 500 index SPX has rallied 13.2% this year.

The average price target has fallen to $12.60 for $14.73, but still implies a more than tripling in price.

Evercore ISI analyst James West reiterated the outperform rating he's had on the stock since early 2021. And although he chopped his stock price target down by 32%, his new target of $25 is nearly seven-times what the stock is trading at in Friday's premarket.

"We believe the green hydrogen economic is coming close to reality," West wrote, as "favorable" government programs such as the Inflation Reduction Act and the H2Hubs Program provide tailwinds.

West believes 2024 will mark the inflection point for Plug, as margins are expected to begin "meaningfully" expand as the company's scales hydrogen production, costs of production decline and the company begins to monetize renewable energy production tax credits.

-Tomi Kilgore

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11-10-23 0915ET

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