Well, that didn’t go very well, did it? Plug Power’s (NASDAQ:PLUG) latest quarterly readout proved to be something of a disaster, and investors reacted in kind.
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On Friday, the stock plummeted by 40%, and it continued its decline by another 5% on Monday morning, bringing it down to levels last seen at the onset of the pandemic. This drop followed the hydrogen specialist’s Q3 report, which was almost exclusively dedicated to disappointing metrics. Furthermore, the company issued a going concern warning, indicating that without raising more cash, it might struggle to stay afloat next year.
In Q3, revenue rose by 5.4% year-over-year to $198.71 million, falling short of consensus expectations by $23 million. At the other end of the spectrum, representing the 13th consecutive quarter during which losses came in wider than the consensus estimate, EPS hit -$0.47, $0.16 worse off than Wall Street’s forecast.
Year-to-date, the losses have reached $726.4 million, but that’s not even the worst bit. So far in 2023, the cash burn has totaled $1.35 billion, a 60% deterioration from the same period last year.
Should the present cash burn rate continue, by the end of the year, an additional $450 million will evaporate. Considering Plug currently has around $110 million in cash and equivalents, that is a big problem.
The print alarmed not only investors, but the analyst community too. Amongst several Street downgrades, J.P. Morgan’s Bill Peterson also thinks it’s time for a reassessment of his PLUG model.
“Plug Power’s 3Q earnings illustrated numerous near-term challenges the company is facing,” Peterson said. “Once armed with a pristine balance sheet after raising meaningful capital, Plug’s short-term cash has been whittled down as a result of operational and scaling up challenges and an unfavorable hydrogen supply environment. This has led to significant margin challenges and higher than expected cash burn to the point that Plug Power put out a ‘going concern’ notice in its 10Q after market hours.”
While Peterson thinks the company “can cycle past” its current cash flow issues, it needs to do so against a backdrop of challenging operating and capital markets environments. Moreover, for shares to gather momentum again, the company will need to sort out its balance sheet issues first.
As such, Peterson downgraded his PLUG rating from Overweight (i.e., Buy) to Neutral and lowered the price target from $10 to $6. (To watch Peterson’s track record, click here)
Looking at the consensus breakdown, based on 11 Buys and 14 Holds, PLUG stock claims a Moderate Buy consensus rating. While several Street analysts have reduced their price targets following the Q3 print, some still have very big expectations; as such, the $11.44 average target makes room for one-year gains of a very handsome 224%. (See PLUG stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
