On Thursday, Piper Sandler adjusted its outlook on shares of Plug Power (NASDAQ:PLUG), reducing the price target on the stock to $1.40 from the previous $1.60 while maintaining an Underweight rating. The firm's analysis followed Plug Power's third-quarter financial results for 2024, which did not meet the consensus expectations, although the results were not as poor as Piper Sandler had projected.
The company's financial performance revealed that while Plug Power's year-over-year cash burn has shown improvement throughout 2024, it is still considered excessively high. The analyst noted that despite the Department of Energy loan potentially covering the remaining Texas CapEx, Plug Power would likely need to continue raising capital. The third-quarter annualized operating cash flow was reported at a negative $700 million.
Moreover, Plug Power confirmed its revenue guidance for 2024, suggesting a decrease of 10-20% year-over-year. This sets a high bar for the fourth quarter of 2024, as the company would need to see a substantial ramp-up in revenue. However, Piper Sandler expressed caution due to Plug Power's history of not meeting expectations, forecasting a more significant 29% year-over-year revenue decline for 2024.
During a recent symposium, Plug Power presented its outlook for 2025 and a long-term goal of achieving a 30% compound annual growth rate (CAGR) in revenue.
The analyst from Piper Sandler expressed skepticism about these projections, particularly questioning the logic behind investing in domestic grid-tied green hydrogen projects in the United States, where there is a shortage of continuous power supply. Nonetheless, the firm acknowledged that government initiatives might boost the development of such projects in Europe.
In conclusion, Piper Sandler's unchanged Underweight rating reflects concerns about Plug Power's ongoing cash burn, which is expected to be primarily funded by equity holders in the forthcoming years, with $793 million already raised up to September 30, 2024.
In other recent news, Plug Power has experienced several significant developments. BTIG downgraded the company's stock from Buy to Neutral due to slower than expected global hydrogen demand growth. Simultaneously, the company's 2025 revenue guidance was revealed to be approximately 20% below the consensus, causing a shift in the stock's rating.
Plug Power has also revised its margin targets, aiming for positive gross margins by the end of 2025 and positive EBITDA margins by the second half of 2026.
BMO Capital Markets and Evercore ISI adjusted their financial outlooks on Plug Power, both reducing the stock's price target but maintaining their respective Underperform and Outperform ratings. H.C. Wainwright, on the other hand, maintained a Buy rating on Plug Power shares despite a year-over-year decline in third-quarter revenue.
Plug Power has also announced a private placement of an unsecured convertible debenture worth $200 million, which is expected to convert into up to 125 million shares of the company's common stock. This move may provide additional capital for the company's operations.
Furthermore, the company is expanding its hydrogen production infrastructure, with new facilities in Georgia, Tennessee, and Louisiana expected to be operational by Q1 2025. These are the recent developments that investors should note.
InvestingPro Insights
Recent InvestingPro data aligns with Piper Sandler's cautious stance on Plug Power. The company's market capitalization stands at $1.8 billion, reflecting the significant challenges it faces. Plug Power's revenue for the last twelve months as of Q3 2024 was $659.5 million, with a concerning revenue growth decline of 25.89% over the same period. This decline supports Piper Sandler's skepticism about the company's ability to meet its revenue guidance.
InvestingPro Tips highlight additional concerns. One tip notes that Plug Power is "quickly burning through cash," which corroborates Piper Sandler's analysis of the company's high cash burn rate. Another tip indicates that the company "may have trouble making interest payments on debt," further emphasizing the financial strain Plug Power is experiencing.
These insights are part of 13 additional tips available on InvestingPro, offering a comprehensive view of Plug Power's financial health and market position. For investors seeking a deeper understanding of Plug Power's prospects, exploring these additional tips could provide valuable context to Piper Sandler's analysis.
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