On Friday, BMO Capital Markets adjusted its outlook on shares of Plug Power (NASDAQ:PLUG), decreasing the stock's price target to $1.80 from the previous $2.25. The firm maintained its Underperform rating on the shares of the hydrogen fuel cell systems manufacturer. The revision follows Plug Power's second-quarter earnings call and update, which, according to the firm, presented continued challenges in key areas.
The report highlighted that Plug Power experienced an increased sequential cash burn in the second quarter, with a loss of $361 million compared to $260 million in the first quarter. Despite the incorporation of 45V tax credits, which positively impacted gross margins for the first time, margins remained significantly low at -92%. This figure stands in contrast to BMO Capital's estimate of -64% and the consensus estimate of -43%.
Furthermore, Plug Power provided a clarified revenue outlook, projecting between $825 million and $925 million. This update modifies the company's previous target, which anticipated a year-over-year growth of over 15%. The firm expressed concern over Plug Power's liquidity, even considering the available at-the-market (ATM) offering capacity and a recent equity offering conducted in July.
In the words of the BMO Capital analyst, "Even with remaining ATM capacity and July equity offering, we see liquidity as tenuous." The firm reiterated its Underperform rating while setting the new lower price target of $1.80 per share for Plug Power. The revised target reflects the firm's assessment of the company's financial health and market position following the latest quarterly results.
InvestingPro Insights
As investors digest the revised outlook from BMO Capital Markets on Plug Power, it's worth considering additional facets of the company's financial health and market position. According to real-time data from InvestingPro, Plug Power's market capitalization stands at $1.8 billion, highlighting the scale of the company within the hydrogen fuel cell industry.
The company's revenue for the last twelve months as of Q2 2024 has been reported at $684.49 million, although it has seen a decline of 22.2% during this period. This contraction in revenue aligns with the concerns expressed by BMO Capital Markets regarding the company's growth projections.
InvestingPro Tips further underscore the challenges faced by Plug Power. Analysts have noted the company's high cash burn rate, with Plug Power quickly depleting its cash reserves. This is a critical point of concern, particularly as the company's gross profit margins remain weak, with a staggering -79.8% reported for the last twelve months as of Q2 2024.
Moreover, the stock has experienced significant price volatility, and analysts do not expect the company to turn profitable this year. For investors considering the long-term potential of Plug Power, it's important to note that there are 13 additional tips listed on InvestingPro, offering deeper insights into the company's financial metrics and stock performance.
InvestingPro's fair value estimate of $2.94 suggests a more optimistic valuation than BMO Capital's target, potentially providing a different perspective for investors weighing the stock's future prospects. With the next earnings date set for November 7, 2024, stakeholders will be closely monitoring Plug Power's performance and strategic initiatives in the coming months.
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