Navigating the Energy Maze
Plug Power Inc. experienced a remarkable 31% surge in its shares on Tuesday following the announcement of a new funding arrangement in the alternative energy sector. Despite this, BMO Capital Markets analyst Ameet Thakkar has adopted a bearish stance on the company's stock, expressing skepticism about brighter prospects.
In a report issued on Wednesday, Thakkar acknowledged certain "positives" revealed during the company's recent business update call. However, he also pointed out what he perceives as an "increasingly arduous path" between the present moment and the potential receipt of funds from the Department of Energy's discussed loan facility.
"While it might be tempting to believe that we are closer to the light at the end of the tunnel following a challenging period for PLUG shares after [Tuesday’s] call, we exited with more concerns," Thakkar wrote.
Thakkar expressed doubts about the feasibility of Plug Power's timeline for securing the Department of Energy loan, deeming it "fairly optimistic." He emphasized that despite the company's efforts to address financial challenges, such as a significant year-over-year improvement in negative cash flow from operations and reduced capital expenditures, there is still downside risk to PLUG shares.
Acknowledging the company's strategic move to cut back on capital spending and prioritize transactions that are "immediately" accretive to free cash flow, Thakkar labeled these actions as "overdue." However, he maintained his belief that the company might need to issue "hundreds of millions of equity" in the first quarter due to revenue pressures, potentially putting downward pressure on the stock.
Last week, Plug Power announced an agreement to sell up to $1 billion in common stock through an at-the-market issuance sales agreement with B. Riley Securities.
In response to these concerns, Thakkar downgraded his rating from market-perform to underperform and adjusted his price target from $3.50 to $2.50. As of Wednesday morning trading, the stock was down more than 2% after an initial opening higher.
