Plug Energy (PLUG -3.69%) inventory’s 26% run-up in July after a precipitous fall within the earlier months led many buyers to consider that the inventory had bottomed. That euphoria did not final lengthy, although. Shares of the hydrogen gasoline cell producer gave up all these positive factors after which some in August, slumping by 35.5%, based on information supplied by S&P International Market Intelligence.
With Plug Energy bagging a number of provide offers for electrolyzers in latest months, together with a pair in July, buyers could have believed the loss-making firm might flip cash-flow-positive prior to beforehand anticipated. The quarterly numbers the corporate launched in August recommend in any other case.
Plug Energy generated document quarterly income of $260 million within the second quarter. Income was up 72% 12 months over 12 months due to new hydrogen set up websites and robust demand for gasoline cell techniques. Administration additionally reaffirmed its outlook for 2023 income of $1.3 billion on the midpoint of its steering vary, which might quantity to 85% development over 2022.
That is strong development, however buyers aren’t impressed as a result of though Plug Energy’s prime line is headed in the suitable course, its backside line is not. In Q2, Plug Energy’s gross loss greater than doubled 12 months over 12 months to $78 million. It additionally consumed $625 million of money for working actions towards a internet lack of $443 million in the course of the six months that ended June 30.
Plug Energy inventory tumbled within the wake of the earnings report as buyers realized the corporate stays removed from profitability. Its dwindling gross margin additionally compelled a number of analysts to slash their value targets on the hydrogen inventory, together with Roth MKM analyst Craig Irwin, who lower his goal to $7.50 per share from $13 a share, based on TheFly. Irwin wrote that he believes the corporate might spend much more on commissioning its new vegetation than beforehand anticipated. His value goal for Plug Energy is now among the many lowest within the analyst group.
Plug Energy’s inexperienced hydrogen plant in Georgia is in its last stage of commissioning, and the corporate can also be increasing capability at different vegetation, together with its gigafactory in Rochester, New York. These are good development strikes, however they arrive at a value and require cash. That explains why Plug Energy’s bills are surging, and why the corporate is exploring funding choices together with taking up debt. Though Plug Energy would not have plenty of debt on its books proper now, buyers would favor to see the corporate generate constructive money move from incremental revenues to fund development relatively than accessing exterior funding that may solely add to its curiosity bills.
There is a sliver of hope, although. Plug Energy expects margins to enhance significantly via the remainder of 2023 and past because it begins producing inexperienced hydrogen internally at new vegetation as an alternative of shopping for all of the gasoline from the market. Plug Energy’s gross margin, due to this fact, shall be an important metric for buyers to observe within the coming quarters, because it might decide the place the inventory is headed subsequent.
Neha Chamaria has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.