Plug Power May Be Plagued By Another Challenging Year - Analyst Forecasts Negative Fuel Margins In FY24

Piper Sandler analyst Kashy Harrison reiterated the Underweight rating on Plug Power, Inc. PLUG, slightly raising the forecast to $2.90 from $2.80.

While the analyst sees positive catalysts for Plug Power in the near term, beyond near-term catalysts, Harrison projects “another challenged financial year.”

Specifically, Harrison models decline due to a potential reset within material handling (both revenues/margins), given the transition toward direct purchase.

The analyst still forecasts negative FY24 fuel margins due to legacy contracts (expect PPAs/service to also be negative).

According to the analyst, Plug Power’s unres cash burn (funded via ATM) should improve year over year due to inventory management, CapEx reduction, and restricted-cash release.

However, Harrison sees deeply unprofitable operations for the foreseeable future (barring radical cost reductions) that may eventually require continued equity capital markets activity (DOE funds CapEx).

The analyst sees a ~$300 million electrolyzer backlog, while flattish year over year is expected to be captured within 1-2 years. 

According to the analyst, this is supportive of management’s assertion of growth into 2024.

The company is also deploying some investments in Hyvia and possesses acquisition-related contingencies in 2024 ($0.2B), notes the analyst.

As internal hydrogen ramps up, costs should considerably improve in the second half of the year, Harrison adds.

The cryo business grew dramatically in 2023, but the year-end backlog is down 55% year over year due to less liquefier revenues.

Overall, Plug Power expects the cryo business to grow mainly from shortcycle projects, stated the analyst. 

Price Action: PLUG shares are trading lower by 3.37% to $3.73 on the last check Tuesday. 

Photo via Shutterstock