Is it possible for Plug Power stock to recover and potentially double from its current valuation? Amidst a turbulent year and a sharp decline in its stock price, Plug Power, an industry leader in hydrogen fuel cell technology, stands at a significant crossroads with Wall Street bulls suggesting a potential rebound that could see its shares double.
Plug Power Inc., a forerunner in the hydrogen fuel cell sector, has faced a tumultuous period marked by declining stock value, raising investor concerns about its long-term viability. This concern was magnified when a “going concern” warning was issued in November alongside a report detailing larger-than-expected losses and lower-than-expected sales for the third quarter of 2023, with the company citing higher hydrogen costs and supply chain obstacles as key factors.
In the course of the past year, Plug Power’s stock has plummeted by 70%, and currently, it bears a market capitalization of $2.62 billion. The shares, trading below $5, are down over 95% from their 2004 peak, leaving investors and market watchers questioning the company’s future.
Despite this backdrop, optimism persists in certain segments of Wall Street, with some analysts predicting that Plug Power’s shares could double or even exceed that growth in the foreseeable future. This anticipation builds as the company approaches its next quarterly earnings report in early March.
Plug Power’s track record with earnings has been less than stellar, repeatedly failing to meet Wall Street’s profit forecasts over the past four quarters. For the upcoming fourth-quarter report, analysts expect a loss of $0.51 per share, which is wider than the $0.38 per share loss reported in the same quarter of the previous year. Profitability on an annual basis isn’t anticipated until fiscal 2027, although losses are projected to decrease incrementally each year until then.
The company’s third-quarter results brought unwelcome surprises, with a reported loss of $283.5 million, or $0.47 per share, and a drop in revenues. Challenges within the hydrogen network in North America were cited as a primary reason for these disappointing results. Notably, Plug Power’s gross margin also saw a severe decline, intensifying scrutiny on its financial health.
Yet, there appears to be a silver lining. In early February, reports emerged that Plug Power was in the process of securing over $1 billion in government funding, awaiting the final review of a $1.6 billion loan from the U.S. Department of Energy (DoE). This news was more favorably received than the company’s earlier announcement of a stock sale to raise up to $1 billion.
Furthermore, Plug Power reported that its Georgia plant had commenced production of liquid green hydrogen, which may alleviate some operational hitches. CEO Andy Marsh highlighted the importance of funding and the role of the Georgia and upcoming Tennessee plants in reducing production costs and enhancing the supply chain.
Analyst Craig Irwin from Roth MKM recently upgraded Plug Power to a “Buy” rating with a price target of $9, suggesting a potential rally of about 97% from its last closing price. Irwin cited a visit to the Georgia facility as a basis for confidence in the ramp-up and resolution of major technical issues. Similarly, H.C. Wainwright maintained a bullish “Buy” rating with an ambitious target price of $18.00.
The consensus among Wall Street analysts has turned more cautious, with an average rating shifting to “Hold.” However, of the 25 analysts covering Plug Power, the mean price target remains at $6.31, about 38% above the current levels.
As Plug Power approaches its next financial disclosure, the market is poised to gauge whether the firm can navigate through and resolve the financing and supply chain challenges it faced throughout 2023. The upcoming report will undoubtedly be a pivotal event, with the potential to either validate the optimistic projections or reaffirm the concerns that have surrounded the company in the recent past.
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