Plug Power Inc (PLUG)

[B_B!]

Plug Power Faces Sell Rating Amidst Liquidity Concerns and Dismal Financial Performance
Howard Kim May 10, 2024

Plug Power (PLUG – Research Report), the Industrials sector company, was revisited by a Wall Street analyst today. Analyst Ameet Thakkar from BMO Capital maintained a Sell rating on the stock and has a $2.50 price target.

Ameet Thakkar has given his Sell rating due to a combination of factors including Plug Power’s disappointing first-quarter performance which missed the already low expectations for the company. The outperformance of Plug Power shares is attributed to a quarter-over-quarter reduction in cash burn and lower use of the at-the-market (ATM) equity program in the second quarter relative to what was anticipated. However, Thakkar remains skeptical about Plug Power’s ability to meet its target of reducing cash burn by 70% year-over-year. Furthermore, the company’s progress toward achieving break-even gross margins seems increasingly unlikely, and the uncertainty surrounding the timing of a potential Department of Energy loan guarantee adds to liquidity concerns.

Additionally, the sell rating reflects concerns about further dilution of shares due to the company’s reliance on its ATM program to fund its cash flow deficit, which was $266 million in the first quarter. Despite some evidence of a slowing cash burn, Thakkar estimates a total cash burn of $1 billion for the year, which is a 44% reduction year-over-year but likely requires continued equity issuance under the ATM program. The decline in gross margins was more significant than expected, with a -132% gross margin in the first quarter compared to the consensus estimate of -60%. The negative fuel cell product margins and the improbability of reaching positive gross margins by the fourth quarter of 2024 also contribute to the rationale behind the Sell rating.

In another report released today, Piper Sandler also maintained a Sell rating on the stock with a $2.50 price target.
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