On Friday, Piper Sandler maintained its Underweight rating on Plug Power (NASDAQ:PLUG) shares, with a steady price target of $2.50.
The firm's assessment follows Plug Power's announcement of a $200 million equity offering aimed at funding its operations. This decision comes as the company, with a market cap of approximately $2.2 billion as of May 9, faces inquiries about the need for an equity offering in light of its available at-the-market (ATM) financing option and its rate of cash consumption.
The company reported a significant cash burn, with calculations indicating a total cash burn of at least $295 million, exceeding both Piper Sandler's and the Street's estimates of $389 million and $201 million, respectively. Additionally, unrestricted cash burn was estimated to be at least $255 million. The exact amount of cash Plug Power drew from the ATM between May 9 and June 30 remains unspecified.
Despite deploying over $200 million in products and services during the second quarter, Plug Power's revenues are expected to be lower, considering the applicable accounting rules. In response to the financial situation, the company is taking measures such as workforce reductions and price increases to enhance margins in the second quarter of 2024. Moreover, Plug Power plans to sell certain credits to improve liquidity.
Investors and analysts are anticipating the upcoming earnings report, which should provide further insights into the strategic reasoning behind choosing an equity offering over ATM financing and what the future margin trajectory might look like for the company.
In other recent news, Plug Power has been the focus of several significant developments. BMO Capital maintained an Underperform rating on Plug Power, citing liquidity concerns following the company's equity offering and a decrease in its unrestricted cash balance.
Plug Power also reported robust revenue initiatives and cost-saving measures, including the construction of green hydrogen plants and diversification of product offerings. The company received a conditional commitment for a loan guarantee of up to $1.66 billion from the Department of Energy, contingent upon meeting certain conditions.
Several analyst firms have provided their perspectives on Plug Power's shares. Canaccord Genuity and Truist Securities maintained a Hold rating, while UBS maintained a neutral stance but reduced its stock target.
In terms of operational updates, Plug Power has installed and commissioned over 95 megawatts of electrolyzer systems worldwide and secured 7.5 gigawatts in global hydrogen project contracts. These developments are part of the company's ongoing efforts in the hydrogen fuel market.
InvestingPro Insights
In light of the recent developments with Plug Power (NASDAQ:PLUG), InvestingPro offers additional insights that could be crucial for investors monitoring the company's financial health and market performance. According to InvestingPro data, Plug Power has a market capitalization of approximately $2.17 billion and is experiencing a negative P/E ratio trend, with the last twelve months as of Q1 2024 showing a ratio of -1.82. This data aligns with the concerns raised about the company's cash burn and revenue challenges.
Two notable InvestingPro Tips for Plug Power include the fact that analysts have revised their earnings upwards for the upcoming period, which may suggest some optimism about the company's future performance. Additionally, Plug Power's stock generally trades with high price volatility, which could be of interest to investors looking for short-term trading opportunities or those concerned about the stock's stability. It's worth noting that Plug Power is not expected to be profitable this year, and the company's valuation implies a poor free cash flow yield.
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