On Tuesday, Seaport Global Securities adjusted its stance on Plug Power (NASDAQ:PLUG), moving from a Buy to a Neutral rating. The shift in rating comes as the firm takes a cautious approach towards the clean hydrogen (H2) market's slower-than-expected development and less favorable policy environment.
The analyst from Seaport Global Securities provided insight into the decision, pointing out that the current market conditions present a balanced risk-reward scenario at Plug Power's current valuation. The company is in the process of securing necessary funding, curbing its cash burn, and seeking to improve profit margins. The firm has chosen to remain on the sidelines until there is a noticeable acceleration in the adoption of clean hydrogen technologies or until Plug Power is on the verge of achieving profitability.
The valuation of Plug Power was also a topic of discussion, with the analyst noting that based on consensus estimates for 2024 and 2025, the company is trading at enterprise value to sales (EV/Sales) multiples of 2.2 times and 1.5 times, respectively. These figures represent approximately a 30% premium compared to the average trading multiples of its peers in the fuel cell and hydrogen technology sector.
Seaport Global Securities' new rating indicates a more neutral expectation of Plug Power's stock performance in the near term. The firm will be monitoring the company's progress in capital raising, financial management, and market conditions as it reassesses its investment stance.
InvestingPro Insights
As Plug Power (NASDAQ:PLUG) navigates a challenging market environment, recent data from InvestingPro provides a deeper look into the company's financial health and stock performance. The market cap stands at $2.63 billion, reflecting the company's current valuation within the industry. Despite a notable sales growth of 38.49% over the last twelve months as of Q1 2023, the company's gross profit margin has been negative at -32.84%, highlighting the cost challenges Plug Power faces.
InvestingPro Tips suggest that analysts expect sales growth in the current year, which could signal potential for the company's future revenue performance. However, concerns are raised as Plug Power is quickly burning through cash and analysts have revised their earnings downwards for the upcoming period. Notably, the stock has experienced significant return over the last week, but it's important to consider that it generally trades with high price volatility, which could be a key factor for investors looking at short-term movements.
For investors seeking additional insights, there are more InvestingPro Tips available, including the company's cash flow situation and profitability outlook. With the use of coupon code SFY24 for an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 for an additional 10% off a 1-year InvestingPro+ subscription, investors can access these valuable tips and make more informed decisions. There are 17 additional InvestingPro Tips listed for Plug Power that could further guide investment strategies.
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