Is Plug Power a Buy Following Financial Statements Fiasco?

Over the past month, shares of Plug Power (PLUG) have come under pressure. One of 2020’s outperformers suffered as the market wide pullback particularly affected growth stocks, with the new energy cohort taking a real beating. Disappointing Q4 earnings haven’t helped either and now jittery investors will have to contend with more bad news.

On Tuesday, the hydrogen fuel cell specialist said it will have to refile its fiscal 2018–2019 financial statements along with some recent quarterly filings, after it had spotted non-cash related errors while preparing its 10-K filing with auditor KPMG. The mistakes, said the company, relate to “the book value of right of use assets, certain service contracts, and certain long-lived assets.”

Plug was slated to file its 10-K annual report with the SEC earlier this month but asked for an extension; the reason for the delay has now become apparent.

The company has said no misconduct was detected and the restatements are not anticipated to affect the company’s business operations, cash position or commercial agreements.

Understandably, investors didn’t like the news, sending shares down in the subsequent session. While Oppenheimer analyst Colin Rusch expects the stock to come under pressure, the analyst takes a more measured approach.

“We understand the accounting treatment of its lease and service agreements are at the root of the issue. We have seen the need for similar restatements from other companies in our coverage as the standards have evolved for such transactions,” the 5-star analyst said. “We would expect shares to trade off on the news and have a modest overhang until the issue is resolved. We remain constructive on PLUG’s growth, strategic position, and the strength of its balance sheet to help facilitate growth.”

It is not known yet when the issue will be resolved but Rusch says PLUG’s financial team is “working attentively to resolve this issue as soon as possible.”

Overall, PLUG has made no changes to its gross billings estimates; the company still anticipates gross billings of $475 million in 2021, $750 million in 2022, and $1.7 billion by 2024.

To this end, Rusch reiterates an Outperform (i.e. Buy) rating on PLUG, along with a $62 price target. Investors are looking at upside of 67%, should Rusch’s forecast play out accordingly. (To watch Rusch’s track record, click here)

Rusch’s forecast is almost in line with the rest of the Street’s expectations; going by the $62.85 average price target, shares are expected to appreciate by 70% over the next 12 months. Barring 2 Holds and 1 Sell, all 10 remaining reviews are Buys, resulting in the stock’s Strong Buy consensus rating. (See PLUG stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.