Plug Power (NASDQ:PLUG) is a stock that has mostly been dealing with negative sentiment over the past year. That is clearly evident in its trailing twelve-month losses of 74%. However, the stock has managed to stay in the green since the company’s annual update on January 23.
Truist analyst Jordan Levy puts the improving sentiment down to “perceived optimism surrounding a DoE loan facility & initial volumes out of Georgia.”
However, with the hydrogen fuel cell specialist about to report Q4 results tomorrow (Friday), Levy does not have high hopes.
“We see another big cash burn qtr in 4Q with minimal tangible evidence for a step-change improvement in the coming qtrs.,” the analyst said. “We ultimately expect continued margin headwinds coupled with the ATM overhang (~$300mm of $1bn sold as of 2/23) to keep shares range bound.”
The key to improving margins this year rests on the fuel ramp. With the Georgia facility now operational and the Tennessee facility resuming production in Q1, Levy anticipates fuel margins will improve over the course of the year, reaching a negative 26% run rate by Q4, with price raises for customers supporting the strategy. Along with updates on how the ramp has been going at Georgia/Tennessee, Levy will be hoping for a timeline update regarding the Louisiana plant coming online.
“We continue to see hydrogen production ramp as the key NT item for Plug to improve its cash flow position during FY24, while we remain uncertain with a lack of visibility on longer term timelines for the company’s future facilities in Texas and NY,” Levy commented.
The company has also been addressing its huge cash burn issues, although its financial position has been granted “some breathing room” following the $1 billion ATM financing arrangement obtained earlier this year. Along with increased focus on capex spend/inventory management, PLUG recently announced a >$75 million opex reduction proposal and intends to prioritize transitioning customers to direct sales models instead of PPAs (Power Purchase Agreements) in order to lessen restricted cash needs.
“While we are positive on the company’s announcements, we continue to see risk/uncertainty in Plug’s NT financials, and will be looking for details around timing/implementation of these initiatives during the company’s upcoming earnings call,” Levy summed up.
All told, Levy maintained a Hold (i.e., Neutral) rating on Plug shares, yet raised his price target from $3 to $4. This adjustment suggests a potential upside of 10% from current levels. (To watch Levy’s track record, click here)
Levy’s cautious stance resonates among his peers, with a consensus rating of Hold, comprising 13 Holds, 5 Buys, and 3 Sells. Nonetheless, certain analysts express optimism, reflected in the $5.30 average target price, hinting at a potential 46% return over the next 12 months. (See PLUG stock forecast)
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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.
