On Tuesday, Plug Power (NASDAQ:PLUG) maintained its Buy rating and $5.00 price target from BTIG, even after the company's stock took a hit following its earnings report. The company's shares dropped approximately 7% in early morning trading due to revenue figures falling short of expectations.
Plug Power reported revenue of around $174 million, which was about 16% below the consensus estimate of approximately $207 million. The shortfall was primarily attributed to equipment sales reaching only $107 million, which was roughly 28% below the consensus.
Despite the revenue miss, Plug Power's revenue saw an increase of about 21% sequentially, although it was down around 13% year-over-year. The company did see an improvement in overall gross margin, which rose to -58% from -92% in the previous quarter. However, this figure was still beneath the -40% gross margin anticipated by the Street. The improvement in margins was mainly driven by better equipment margins of -40% and fuel margins of -86%, showing significant progress from -69% and -95% respectively in the second quarter.
The company's hydrogen fuel margins were affected by planned maintenance activities in Georgia and Tennessee, but Plug Power's fuel business is still benefiting from internally-sourced volumes and the recognition of Investment Tax Credits (ITCs) from the Inflation Reduction Act (IRA) in Georgia. BTIG forecasts that fuel margins will continue to improve into 2025 as the Louisiana joint venture is expected to reach full capacity by the first quarter of 2025.
Plug Power has an extensive deployment of 50-60 thousand fuel cells, which indicates an annual hydrogen demand of around 50 tons per day. BTIG's analysis suggests that Plug Power could potentially decrease hydrogen fuel costs by 40-50% once its first three electrolyzer projects are fully operational. This would be a significant cost reduction compared to the current costs of sourcing from third parties. The firm reaffirms its Buy rating on Plug Power based on these projections.
In other recent news, Plug Power has reported its third-quarter earnings and revenue, which did not meet the expectations of Truist Securities and Wall Street. The company reported a revenue of $173.7 million, falling short of the consensus estimate of $208.16 million, marking a 12.6% year-on-year decline. The company also reported an adjusted loss per share of $0.25, slightly higher than the expected loss of $0.24 per share.
Truist Securities maintained its Hold rating on Plug Power, citing shortfalls in sales of equipment, fuel cell systems, and infrastructure as key factors impacting the overall revenue. Despite improvements in gross margins, the company's performance did not align with market expectations.
In addition, Plug Power has adjusted its revenue guidance for the fiscal year 2024 downwards by approximately 14% at the midpoint, 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. These recent developments reflect the company's commitment to building a sustainable and profitable hydrogen future, as stated by CEO Andy Marsh.
InvestingPro Insights
Recent data from InvestingPro paints a challenging picture for Plug Power, aligning with the company's recent earnings report. The company's market capitalization stands at $1.61 billion, reflecting the recent stock price decline. InvestingPro Tips highlight that Plug Power is "quickly burning through cash" and "may have trouble making interest payments on debt," which could explain the company's struggle to meet revenue expectations.
The revenue decline noted in the article is further supported by InvestingPro data, showing a significant revenue growth decline of -22.2% over the last twelve months. This aligns with the InvestingPro Tip that "analysts anticipate sales decline in the current year."
Despite these challenges, Plug Power is "trading at a low Price / Book multiple" of 0.54, which could potentially interest value investors. However, it's crucial to note that the company is "not profitable over the last twelve months" and has a negative gross profit margin of -79.8%, underscoring the operational difficulties mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Plug Power, providing a deeper understanding of the company's financial health and market position.
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