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Plug Power shares target cut to $5 on cost concerns

 

On Monday, Craig-Hallum adjusted the price target for Plug Power (NASDAQ:PLUG), a leading hydrogen fuel cell company, reducing it to $5.00 from the previous $6.00. Despite the lower target, the firm maintained a Buy rating on the stock.

This decision follows Plug Power’s fourth-quarter earnings, which had been anticipated to reflect a challenging period for the company. The report confirmed lower pre-announced revenues and significant gross margin weaknesses, particularly in providing fuel, which had a notable impact on the company’s financials.

In early 2024, Plug Power initiated significant cost reduction measures and prioritized cash management, even though it may limit revenue growth. The company has refrained from providing financial guidance for 2024.

Still, Plug Power has recently started and is increasing green hydrogen production in Georgia and Tennessee, a move expected to enhance margins by reducing hydrogen sourcing costs, which were previously unfavorable when procured from industrial gas companies.

The company has also been active in capital raising efforts, securing over $300 million through its at-the-market (ATM) offering as of last week. This capital infusion has been instrumental in lifting the going concern qualification that was previously weighing on the company’s shares. As Plug Power continues to dominate the hydrogen fuel cell market, it is recognized for its strong commercial prospects.

The firm’s analyst underscored the importance of Plug Power demonstrating its ability to achieve its gross margin improvement targets and a clear trajectory toward profitability, along with strengthening its balance sheet.

Maintaining the Buy rating suggests a continued positive outlook on Plug Power’s market position and future performance, despite the near-term challenges reflected in the revised price target.

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