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On Tuesday, BMO Capital Markets adjusted its outlook on Plug Power stock (NASDAQ:PLUG), currently trading at $1.62, reducing the price target from $1.60 to $1.40, while keeping an Underperform rating on the company’s shares. The adjustment follows Plug Power’s challenging fiscal year 2024, which saw a significant 30% year-over-year decline in revenues, with the stock down 29.58% year-to-date. Additionally, the gross margin loss expanded notably, with a reported figure of -99% after writedowns, and an adjusted figure excluding these writedowns of -80%. This resulted in a substantial EBITDA loss of approximately $1.9 billion for the year. According to InvestingPro data, the company’s financial health score remains weak at 1.42 out of 5.
The company has recognized the need for a strategic shift and is aiming to adopt a "back-to-basics" approach that focuses on improved cost management. In response to the financial results, Plug Power has announced plans to reduce costs by $150-200 million, with an even split between cost of goods sold (COGS) and operational expenses (opex). While the company maintains a healthy current ratio of 1.97, InvestingPro analysis indicates the company is quickly burning through cash.
Despite these cost-cutting measures, BMO Capital maintains a cautious stance on Plug Power. The firm’s analysts emphasize that even with the planned reductions in expenses, Plug Power does not anticipate achieving a positive gross margin until the fourth quarter of 2025. This prolonged timeline to profitability contributes to the rationale behind BMO Capital’s decision to lower the price target to $1.40 per share.
The financial performance of Plug Power has clearly been under scrutiny, with the company facing significant challenges in the past fiscal year. The steps it plans to take to address these issues will be critical for its future, but as of now, BMO Capital’s assessment remains firmly bearish with the Underperform rating unchanged. Investors and market watchers will be keeping a close eye on Plug Power’s progress towards its cost management goals and the eventual impact on its financial health.
In other recent news, Plug Power Inc. reported its fourth-quarter 2024 earnings, which fell short of market expectations. The company announced an earnings per share (EPS) of -$0.2385, missing the forecast of -$0.2249, and revenue of $191 million, significantly below the expected $254.7 million. Despite these setbacks, Plug Power highlighted a substantial decrease in cash burn by over 70% year-over-year, indicating a focus on improving operational efficiency. The company also recorded non-cash charges of $971 million due to asset impairments. Looking ahead, Plug Power has set a revenue guidance for the first quarter of 2025 between $125 million and $140 million, with plans to launch a new hydrogen facility in Louisiana in the second quarter of 2025. Analyst discussions during the earnings call included inquiries about the company’s DOE loan discussions and the progress of hydrogen hubs. These recent developments are part of Plug Power’s broader strategic initiatives to achieve $150-$200 million in annual cost savings.
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