On Tuesday, UBS adjusted its stance on Plug Power (NASDAQ:PLUG), downgrading the stock from Buy to Neutral and setting a price target of $4.75. The move reflects the firm's assessment that the near-term upside potential for the stock is limited.
The downgrade comes after Plug Power's stock faced challenges following their third-quarter report for 2023. Concerns were initially raised due to liquidity issues mentioned in the company's 10-Q filing, difficulties in commencing operations at the Georgia green hydrogen facility, and a significant drop in gross margin to -69%. Over the past two weeks, the company has made progress by bringing the Georgia facility online and advancing with a Department of Energy loan, leading to a recovery in the stock price from its recent low of $2.42.
Management at Plug Power has announced a strategic shift towards prioritizing cash management over top-line growth, which UBS views as a positive development. Despite these improvements, the firm notes that Plug Power continues to struggle with a negative gross margin, which was -69% in the third quarter of 2023, and does not anticipate this metric turning positive in 2024.
UBS highlights that resolving the negative gross margin remains a critical issue for Plug Power. The firm believes that to gain the confidence of long-term investors, Plug Power must demonstrate a clear strategy for achieving positive gross margin, addressing the ongoing cash-burn problem.
InvestingPro Insights
As Plug Power (NASDAQ:PLUG) navigates through its strategic shift towards better cash management, recent data from InvestingPro provides a snapshot of the company's financial health and market performance. With a market capitalization of $2.57 billion, the company has shown a significant revenue growth of 38.49% over the last twelve months as of Q3 2023. Despite this, Plug Power's gross profit margin remains negative at -32.84%, underscoring the challenges UBS highlighted in their downgrade rationale.
An InvestingPro Tip notes that analysts have revised their earnings expectations downwards for the upcoming period, aligning with UBS's concerns regarding the company's profitability. Additionally, Plug Power's stock is known for high price volatility, which could be a factor for investors to consider, especially in light of the recent downgrade.
Investors looking for more comprehensive analysis and additional InvestingPro Tips can find a total of 18 tips on Plug Power, including insights on sales growth expectations and cash burn rates at https://www.investing.com/pro/PLUG. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription, providing a deeper dive into the company's financials and market expectations.
While Plug Power has experienced a strong return over the last week with a 16.49% price total return, the bigger picture shows a stock that has struggled significantly over the last year, with a price total return of -73.63%. This volatility and performance are critical factors for investors to consider, especially those looking for long-term stability and growth.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.