On Tuesday, Canaccord Genuity maintained its Hold rating on Plug Power (NASDAQ:PLUG) but reduced the price target to $2.25 from the previous $2.50. The adjustment reflects the firm's reaction to a combination of factors affecting the company, including ongoing business model transitions, balance sheet concerns, and recent shifts in the political landscape in Washington.
The analysis by Canaccord Genuity highlighted that Plug Power's recent quarterly results and guidance for the fourth quarter of 2024 fell short of expectations. However, there was a silver lining as some improvement in margins was noted. Additionally, the company has secured a new $200 million convertible note to address its short-term cash requirements.
Management emphasized during the earnings call their active engagement with the Department of Energy (DOE) to advance and finalize the DOE's $1.7 billion loan facility. The company expressed confidence in their progress and ongoing discussions with the DOE, aiming to conclude the loan agreement promptly in light of the upcoming administrative changes. The statement from the company was optimistic about the future, stating, "We're targeting to close in the near-term… we have a clear path with the DOE to close that [loan] out before changing administration... We know how to execute against it.”
Despite the reduced price target, Canaccord Genuity's interest was piqued by Plug Power management's renewed focus on profitability and cash flow. The firm is awaiting more substantial evidence and greater clarity regarding the closure of the DOE loan before considering any rating change.
The revised price target of $2.25 suggests there is potential upside, but Canaccord Genuity believes the Hold rating remains justified due to the prevailing uncertainties in the near term. The firm's decision is based on the changes made to their financial model for Plug Power.
In other recent news, Plug Power reported third-quarter earnings and revenue that fell short of analyst expectations. The company posted a revenue of $173.7 million, a 12.6% year-on-year decline, which was below the consensus estimate of $208.16 million. An adjusted loss per share of $0.25 was also reported, slightly higher than the expected loss. In response to these results, Oppenheimer maintained a Perform rating for Plug Power, while BTIG and Truist Securities reaffirmed their Buy and Hold ratings respectively. BTIG anticipates further fuel margin gains in 2025, projecting a potential decrease in hydrogen fuel costs by 40-50% once Plug Power's first three electrolyzer projects are fully operational.
In light of these results, Plug Power adjusted its revenue guidance for the fiscal year 2024 downwards by approximately 14%, which is about 8% below the current estimates projected by Wall Street analysts. The company anticipates revenue in the range of $700 million to $800 million for 2024, driven by a pipeline of orders in electrolyzer, cryogenic, and material handling businesses.
InvestingPro Insights
Recent InvestingPro data paints a challenging picture for Plug Power, aligning with Canaccord Genuity's cautious stance. The company's market cap stands at $1.66 billion, with a concerning Price to Book ratio of 0.55, indicating the stock may be undervalued relative to its assets. This low valuation could be attributed to Plug Power's financial struggles, as evidenced by its negative revenue growth of -22.2% over the last twelve months and a substantial -79.8% gross profit margin.
InvestingPro Tips highlight additional concerns. The company is "quickly burning through cash" and "may have trouble making interest payments on debt," which underscores the importance of the potential $1.7 billion DOE loan facility mentioned in the article. Moreover, the tip that "analysts anticipate sales decline in the current year" corroborates the disappointing quarterly results and guidance noted by Canaccord Genuity.
These insights from InvestingPro provide valuable context to Canaccord's Hold rating and reduced price target. Investors seeking a more comprehensive analysis can access 12 additional InvestingPro Tips for Plug Power, offering a deeper understanding of the company's financial health and market position.
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