Why This Plug Power Analyst Is Undeterred By Q1 Miss; 'Valuation Deserves To Be At High-end Of Peer Group Range'

Plug Power, Inc. PLUG stock plunged to its lowest level in about a year-and-a-half following the release of its quarterly results. An analyst at KeyBanc Capital Markets, however, isn't too worried about the near-term noise.

The Plug Power Analyst: Leo Mariani maintained an Overweight rating and $40 price target for Plug Power shares.

The Plug Power Thesis: Plug Power's first-quarter revenue was 3% below the consensus, reflecting lower-than-expected sales of fuel-cell systems and related infrastructure equipment, analyst Mariani said. The quarterly EBITDA of a negative $91 million also trailed expectations, he added.

The decline in the gross margin further into negative territory was due to higher hydrogen molecule costs and associated higher natural gas prices pressuring fuel business margin, the analyst said, citing the company.

The company was not too optimistic on the second-quarter margin trajectory but suggested a nice improvement in the second half, the analyst said.

Related Link: Why This Analyst Is Bullish On Plug Power

Plug Power reiterated its 2022 revenue guidance of $900 million to $925 million and forecast positive cash flow from operations by 2024, the analyst said. The company also sounded out vertical integration by getting into Class 8 trucks through M&A and partnerships in the large-scale storage and pipeline space, he added.

The liquidity position is solid, given the company's war chest of $4 billion, the analyst noted.

While Plug Power trades at a valuation of eight times its 2023 revenue, in line with peers, the analyst sees the higher end of the peer range as justifiable, given the company's superior growth, great balance sheet and strong product offerings.

Plug Power Price Action: Plug Power stock was trading down 4.39% at $15.91 during pre-market trading on Tuesday, according to Benzinga Pro data. Shares dropped 14.3% on Monday