Tuesday, UBS maintained a Neutral rating on Plug Power (NASDAQ:PLUG), while reducing the price target to $2.75 from the previous $4.75. The firm's analyst cited the company's efforts to implement price increases and anticipated reflections of these changes in the second quarter of 2024. Despite this, the analyst believes the adjustment process will extend beyond the management's expectations.
Electrolyzer sales for Plug Power in the first quarter of 2024 were reported at $1.3 million. The company is expecting a significant increase in these sales in the second quarter and projects a continued ramp-up throughout the year. Plug Power has set a goal of reaching $150 million in quarterly electrolyzer sales by 2025, with the management anticipating the electrolyzer business to yield approximately 30% gross margins.
In response to inquiries following the first presidential debate, the analyst noted that even with a potential change in the White House after the November election, the Inflation Reduction Act of 2022 is unlikely to be repealed. However, a new administration could impact the funding of hydrogen hubs, which rely on the Department of Energy for financial support.
The revised price target is based on a 2.75 times enterprise value-to-sales (EV/Sales) multiple applied to the 2025 sales forecast of $1,086 million, after accounting for net debt and non-controlling interest, resulting in the new share price estimate of $2.75. The valuation of Plug Power is aligned with its peer group, with no change in the methodology, despite the peer multiples having decreased.
In other recent news, Plug Power has reached a significant milestone with 7.5 gigawatts in global hydrogen project contracts. The company's Basic Engineering and Design Package (BEDP) service has seen increasing demand, potentially translating to substantial revenue for Plug Power. Recently, Plug Power secured a 3 GW BEDP contract with Allied Green Ammonia for a project in Australia, along with additional contracts across the United States and Europe.
The company also successfully sold a 25MW PEM electrolyzer to an undisclosed European customer, hinting at future expansion. Truist Securities maintained a Hold rating on the company, emphasizing the importance of successful execution of electrolyzer sales for Plug Power's financial health.
Plug Power has also achieved an industry certification for its one-megawatt high-powered stationary system, potentially supporting applications such as hyperscale data centers and electric vehicle charging stations. However, the company's $1.66 billion loan guarantee from the Department of Energy is under scrutiny, which could potentially impact the realization of the loan. BMO Capital maintained an Underperform rating on the company in light of this development.
InvestingPro Insights
As Plug Power (NASDAQ:PLUG) navigates its pricing and sales strategies, investors are keeping a keen eye on the company's financial health and market performance. According to real-time data, Plug Power's market capitalization stands at $1.71 billion, reflecting the market's current valuation of the company. A concerning metric is the company's negative P/E ratio, which sits at -0.95, indicating that the company is not currently profitable. Additionally, the gross profit margin for the last twelve months as of Q1 2024 is significantly negative at -62.68%, underscoring the challenges Plug Power faces in terms of profitability and cost management.
An InvestingPro Tip suggests that Plug Power may have difficulty making interest payments on its debt, which is a crucial factor for investors to consider when evaluating the company's financial resilience. Furthermore, the stock's volatility is highlighted by another InvestingPro Tip, noting that the stock price has experienced significant fluctuations, which could be a point of concern for risk-averse investors. For those looking to delve deeper into the financial nuances of Plug Power, there are additional InvestingPro Tips available, providing a comprehensive analysis of the company's financial standing and future prospects.
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