Plug Power faces 'increasingly arduous path,' a new bear warns

By Emily Bary

BMO moves to cautious stance on Plug Power's stock

Although Plug Power Inc. shares soared 31% Tuesday after the alternative energy company announced a new funding arrangement, a BMO Capital Markets analyst isn't convinced that better days are ahead.

In fact, BMO's Ameet Thakkar turned bearish on Plug Power's stock (PLUG) Wednesday, writing that while the company revealed some "positives" on its business-update call a day before, he also sees an "increasingly arduous path" between "now and when and if" the company receives the money from the Department of Energy loan facility that it just discussed.

"It might be tempting to believe we are closer to the light at the end of the tunnel after a very tough run for PLUG shares after [Tuesday's] call, but we exited with more concerns," Thakkar wrote.

He believes Plug Power's timeline for clinching the Department of Energy loan seems "fairly optimistic," all while the company must deal with financial trends such as "significant year-over-year improvement in negative [cash flow from operations], reduction of [capital expenditures], and less reliance on equity financing, we see more downside to PLUG shares."

The company is pulling back on capital spending and giving more weight to transactions that are "immediately" accretive to free cash flow, moves that Thakkar calls "overdue." But he still thinks the company will have to issue "hundreds of millions of equity" during the first quarter given revenue pressures, and that issuance could pressure the stock.

Plug Power said last week that it had reached an agreement to sell up to $1 billion in common stock through an at-the-market issuance sales agreement with B. Riley Securities.

Thakkar moved to an underperform rating from his prior market-perform stance, while cutting his price target to $2.50 from $3.50. The stock was off more than 2% in Wednesday morning trading after initially opening higher.

-Emily Bary

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01-24-24 1012ET

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