Hydrogen technology company Plug Power (ticker: PLUG) recently released its second-quarter financial results, leaving investors feeling uneasy. The stock experienced a decline as a result.
In the second quarter, Plug reported a loss of 40 cents per share, which was higher than the anticipated loss of 27 cents per share. However, the company’s sales reached $260.2 million, surpassing Wall Street’s estimate of $237.7 million.
While the sales beat exceeded expectations, it is essential to note that Plug reaffirmed its guidance for full-year 2023 sales. The company projects sales ranging from $1.2 billion to $1.4 billion. This guidance suggests that Plug will generate approximately $830 million in sales during the second half of 2023, aligning with Wall Street’s projection of around $827 million.
Despite the positive aspects of the earnings report, the stock experienced a nearly 10% decline during premarket trading on Thursday. In contrast, S&P 500 and Nasdaq Composite futures saw slight increases of about 0.5% and 0.6%, respectively.
While disappointing earnings play a role in investor concerns, the primary factor affecting sentiment is the company’s production guidance.
Plug Power is actively developing multiple hydrogen-making facilities. One such plant in Georgia is already producing hydrogen—an eco-friendly alternative for fuel cells and power generation. Notably, hydrogen does not produce carbon dioxide when consumed, making it crucial in combating global climate change.
When electricity generated from renewable sources is used to produce hydrogen by passing it through water, it is known as green hydrogen. This process ensures that no carbon dioxide is emitted throughout production. Plug Power is committed to producing green hydrogen.
Although the Louisiana plant was originally expected to achieve full production by late 2023, revised timelines indicate that full production for all three facilities—Louisiana, New York, and Texas—will commence in 2024, approximately six months later than previously estimated.
Investors will be closely monitoring Plug Power’s progress, eager to see how the company navigates its ambitious hydrogen production targets.
Conclusion
Plug Power’s recent second-quarter results have left investors with mixed feelings. While the company exceeded sales estimates and maintained its full-year guidance for 2023, the disappointing earnings and delayed production timelines are cause for concern. With its commitment to green hydrogen production, Plug Power must navigate these challenges to meet the expectations of both investors and the environmentally conscious community.
Optimism for Plug’s Financial Targets
In a recent report, TD Cowen analyst Jeffrey Osborne expressed optimism regarding Plug’s ability to achieve its expected financial targets. However, he also acknowledged the challenges faced by the company in recent quarters and the resulting delays in project timelines. As a result, Osborne believes that expectations for 2023 may lean towards the lower end.
Green-Hydrogen Production Plans
By the end of 2025, Plug plans to commence green-hydrogen production at a rate of 500 tons per day.
Analysts’ Ratings and Price Targets
Despite the aforementioned delays, both Osborne and BTIG analyst Gregory Lewis maintain a positive outlook on Plug. Osborne rates the company’s shares as Buy and has set a price target of $23 per share. Lewis also rates the shares as Buy, but his price target is slightly lower at $14 per share.
Impact of Georgia Plant Delays
The Georgia plant faced additional delays during Q2, and management now expects it to reach a daily liquid hydrogen production of approximately 14 tons later this quarter. These construction delays have been attributed to adverse weather conditions.
Long-Term Potential vs. Near-Term Delays
Both analysts emphasize that they still view Plug’s long-term growth prospects as favorable. However, they acknowledge that investors tend to be concerned by near-term delays.
Positive Reception on Wall Street
Plug continues to enjoy popularity among analysts, with 67% of them rating the stock as Buy. This is higher than the average Buy-rating ratio for stocks in the S&P 500, which stands at approximately 55%. The average analyst price target for Plug is around $18.50 per share, almost $8 higher than the previous day’s closing price.
Hydrogen Business Revenue Growth
Analysts are particularly optimistic about Plug’s revenue growth in the hydrogen business. They anticipate that revenue will reach $3 billion in 2025, a significant increase from the projected $1.3 billion in 2023.
