Morgan Stanley says Plug Power taking ‘step in right direction,’ risks remain

Morgan Stanley analyst Andrew Percoco notes that on the company’s business update call, Plug Power announced that its facility in Georgia is now producing liquid green hydrogen and outlined that it has begun having conversation with customers to increase pricing on its various product offerings and within its fuel business to improve its profitability. While the firm views this as “a prudent business decision,” the magnitude of pricing increases needed to achieve profitability “may be challenging in the current environment,” the analyst tells investors. Management also laid out a goal to reduce its cash burn by 70% in 2024 to about $550M by the firm’s estimate and announced that it has finalized a term sheet with the DOE, which is the final step ahead of receiving a conditional commitment on a $1.6B loan guarantee, the analyst added. While “encouraged” to see the company taking “a strategic step in the right direction” to improve its cash burn-rate and manage liquidity, execution risk remains and the firm believes consistent execution against this target is needed to turn more positive on the stock, so it reiterates its Underweight rating and $3 price target on Plug shares.