Plug Power Inc. (NASDAQ:PLUG) fell 31% in early trading Friday following disappointing third quarter results amid "unprecedented" hydrogen supply challenges. The weak report triggered three Wall Street downgrades on margin and cash flow concerns, among other worries.
The hydrogen solutions provider reported that revenue in the quarter was $199 million, well below the consensus of $224.77 million. Meanwhile, the company reported a loss of $0.47 per share, versus the consensus calling for a loss of $0.31 per share.
"The liquid hydrogen market in North America has been severely constrained by multiple frequent force majeure events, leading to volume constraints which has delayed Plug’s deployments and service margin improvements," the company stated. However, they believe this hydrogen supply challenge is a transitory issue, and expect their Georgia and Tennessee facilities to produce at full capacity by year-end.
Analysts at RBC Capital cut the stock to Sector Perform from Outperform, while slashing the price target to $5 from $12. The analysts cited limited visibility and margin pressures.
While the company sees a line of sight for relief of the supply challenges, the analysts note that more meaningful relief is not expected until the first quarter and sees continued margin pressure and product delivery delays through year-end.
"We reduce our revenue forecast for 2023 to $1.05bn and expect another quarter of negative gross margins at -15%," the analysts at RBC Capital commented. "Additionally, given the lack of visibility on the financing structure we are removing assumptions on project development beyond LA and reducing our revenue and margin expectations for 2024-2025."
Analysts at JP Morgan downgraded shares to Neutral from Overweight and cut its price target to $6 from $10. The analysts note the company's once-pristine balance sheet has been "whittled down" so much so that the company put out a ‘going concern’ notice in its 10-Q after hours.
"While we believe Plug Power can cycle past its current cash flow issues, the current operating and capital markets environments are challenging and we believe PLUG shares are likely to be range bound over the next several quarters until clarity around its balance sheet are sorted out," the analysts at JP Morgan commented.
Analysts at Oppenheimer downgraded shares to Perform from Outperform.
"While we believe PLUG has numerous options for augmenting its balance sheet and will reduce working capital, the compounding effect of lack of hydrogen availability on equipment sellthrough may take a couple of quarters to work through," the analysts at Oppenheimer stated. "At the same time, PLUG's DOEsupported financing is taking significantly longer than expected and is not likely to fund until 2Q24."