The world is gradually waking up to the need for a transition to green energy. The trajectory of the companies involved in this transition, however, is a completely different story. A case in point is Plug Power (NASDAQ:PLUG). Shares of this hydrogen fuel cell solutions provider have tanked by nearly 90% over the last three years, and the company is yet to churn out profits. The share price slump has left many investors wondering if there is light at the end of the tunnel for Plug Power.
Doubts Over a New DOE Loan Guarantee
The U.S. government is banking on hydrogen production from clean energy sources as part of its energy program. Recently, the DOE (Department of Energy) announced a $1.66 billion loan guarantee for PLUG to set up about six hydrogen facilities in the U.S. While the development appeared to be a lifeline for PLUG, the optimism was short-lived after Senator John Barrasso called for an investigation into the loan guarantee, citing potential conflicts of interest.
PLUG’s Dismal Financial Position
A potential investigation could mean a delay in funding for PLUG. This could be a challenge for PLUG, which has been expanding its manufacturing capacity while bleeding cash. Last month, PLUG reported a nearly 43% drop in its Q1 top line and a net loss per share of $0.46. The company is also facing margin pressures.
While PLUG has undertaken actions such as restructuring, lowering headcount, asset impairment, and price increases to boost its fortunes, the company’s weak financials are a key point of concern. At the end of March, the company had a negative free cash flow of $266.4 million and $600 million in total debt. In comparison, its cash balance stood at $172.9 million.
What Is the PLUG Stock Price Forecast?
As a result, PLUG’s share price could remain in the doldrums unless the company shores up its balance sheet. Not surprisingly, BMO Capital’s Ameet Thakkar recently reiterated a Sell rating on the stock, alongside a $2.50 price target. Overall, the Street has a Hold consensus rating on the stock, alongside an average PLUG price target of $4.70.
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