Plug Power's Challenges Remain Despite Strength In Fuel Margins: Analyst

Truist Securities analyst Jordan Levy reiterated the Hold rating on Plug Power, Inc. PLUG, raising the price forecast to $4 from $3.

Despite ongoing challenges with cash burn, Plug Power shares have surged around 30% post-annual update, buoyed by optimism over a potential DoE loan facility and initial volumes from Georgia, notes the analyst.

However, Levy predicts another big cash burn period in the fourth quarter with minimal tangible evidence for a step-change improvement in the coming quarters. 

In addition, the analyst sees continued margin headwinds coupled with the ATM overhang (~$300 million of $1 billion sold as of 2/23) to keep shares range bound. 

Levy sees the company’s shift to direct sales along with negotiations on price increases hindering fuel cell sales until fuel volumes/margins are able to catch up. 

The company announced a new H2 infrastructure deal with long-standing customer Uline (Private). 

However, the analyst doesn’t expect much uplift from the deal in FY24, with only one site expected to come online with 100 fuel cell deliveries over the next 12 months.

With Georgia finally coming online and the company's Tennessee facility restarting production during the first quarter, the analyst forecasts fuel margins improving throughout the year, moving to a -26% run rate by the fourth quarter of 2024.

These apart, Levy is now forecasting electrolyzer sales for the company to be down ~40% sequentially in the fourth quarter of 2023, driven by management commentary around continuing pushouts of deliveries.

The company will announce its fourth quarter 2023 results on Friday, March 1.

Price Action: PLUG shares are trading lower by 1.4% to $3.50 on Wednesday.