Despite finishing on a high note, the past month has seen Plug Power’s (PLUG) stock pullback significantly; the share price now sits ~50% below the 12-month high reached toward the end of January.
While growth stocks have indeed taken a beating, the bear case for Plug was exacerbated by poor Q4 earnings, with the company alarming investors by reporting negative revenue for the quarter.
The negative top-line was due to warrants the company handed to major customer Amazon back in 2017. In order to kickstart its material-handling business, the company sold Amazon the warrants and in return, Amazon ordered equipment and services, sort of like when customers receive a rebate after buying electronic goods.
Due to PLUG stock’s ascent, the value of the warrants today is far higher than what Amazon paid at the time, and the vesting of the remaining warrants impacted the results.
Furthermore, after an audit found non-cash related errors while the company was preparing its 10-K filing, the company announced it will need to refile its fiscal 2018–2019 financial results along with some recent quarterly statements.
These two issues, says J.P. Morgan’s Paul Coster, are behind the recent sell off. However, while the analyst understands the bearish investor sentiment, he believes PLUG has been making the right moves.
“In our view,” Coster said, “The use of warrants was justified given the growth it catalyzed, and the restatement is not surprising given the nature of the firm’s growth over the last two-years, however, we sense that investors are wary of getting involved right now; they want to see a couple of quarters of solid execution, growth without more surprises.”
Coster considers the pullback a “buying opportunity.” However, to reflect “lower multiples across the space, and to reflect the more elevated risk-profile of the firm at this time,” the analyst reduced his price target from $61 to $51. Nevertheless, upside from current levels is still a strong 50%.
Unsurprisingly, Coster’s rating stays an Overweight (i.e. Buy). (To watch Coster’s track record, click here)
Most on the Street keep a bullish stance when considering the hydrogen fuel cell maker’s prospects; the analyst consensus rates the stock a Moderate Buy, based on 9 Buys, 3 Holds and 1 Sell. The forecast is for decent upside, too. Going by the $59.42 average price target, shares are expected to appreciate by ~70% over the next 12 months. (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.
