Plug Power, a hydrogen-technology stock, encountered fluctuations in its shares following a downgrade on Wall Street. BMO Capital Markets analyst, Ameet Thakkar, downgraded Plug to Underperform from Market Perform and made adjustments to estimates and price target in a report released on Wednesday.
On Wednesday, shares of Plug Power experienced ups and downs, currently trading 0.5% higher at $3.74 after a 31% surge on Tuesday.
The substantial increase in share value occurred after CEO Andy Marsh revealed during a call on Tuesday that the company had successfully concluded negotiations with the Department of Energy for a $1.6 billion loan facility. In addition, Plug Power also declared that it had initiated operations at a new plant in Georgia that focuses on producing liquid green hydrogen.
Although investors interpreted these developments as positive news, BMO expressed concerns about the future. According to BMO, there seems to be a challenging road ahead before the DOE funding is secured and flows through to Plug Power. Additionally, BMO remains skeptical about the value accretion of PLUG’s other hydrogen plants, even with the $1.6 billion in DOE funding. The team also found the fourth-quarter revenue guidance to be disappointing.
Conversely, Evercore ISI analysts had a more optimistic outlook on the situation.
A Promising Outlook for Plug Shares
In a recent report, analysts at Evercore expressed their belief that Plug shares will see improved prospects despite ongoing liquidity and capital constraints. They anticipate that lower capital requirements and effective working capital management will alleviate stress on the company. Moreover, they expect operational efficiencies and higher pricing to boost the company’s gross margins.
Although Evercore maintained its Outperform rating on Plug shares, the estimates have been adjusted downwards. In addition, the price target has been revised to $9 from $12.
Recent months have seen a decline in analysts’ bullishness towards the stock, with only 35% now rating the shares as “Buy”, as per FactSet. This number drastically decreased from the 67% rating in July.
Over the past year, Plug shares have experienced a significant drop of 77%. The company even issued a warning last year about its ability to continue as a going concern. Most recently, the stock took a dive due to news of Plug’s agreement with broker B. Riley to sell up to $1 billion in new shares. This move would inevitably dilute the holdings of existing investors.
During a call on Tuesday, Plug management emphasized the importance of cash management and tackling financial challenges as top priorities. To address these concerns, the company has implemented a hiring freeze and plans to reduce payroll costs through attrition.