Plug Power (PLUG 1.26%) reported 2023 earnings last week, and the news was not good.
Missing both sales and earnings estimates, Plug reported a loss of $2.30 per share for the year -- 40% worse than expected. Investors initially sold off the stock on this news, but then there was good news.
Citing plans to create and sell $1 billion-worth of new stock, and then secure a new $1.6 billion Department of Energy loan, Plug announced its "going concern" warning from last quarter had vanished and it now had all the liquidity it needed to remain in business for the foreseeable future.
This apparently sparked optimism at investment banker HSBC, which tweaked its price target just a little lower on Tuesday, reiterating its buy rating on Plug Power and predicting Plug shares will trade for $8.50 in a year, which would yield 133% profit for investors who bought Plug Power stock on Tuesday.
Is Plug Power stock a buy?
According to HSBC, Plug Power's earnings report was "encouraging." True, share dilution from the stock offering means Plug stock might be worth a bit less. On the other hand, while Plug's 2023 losses were gigantic, they were mainly "non-cash charges."
And yet that's not exactly true.
For one thing, raising $1 billion at Plug's current share price of $3.73 would imply Plug needs to issue about 269 million new shares, diluting existing shareholders out of nearly 40% of their ownership stake. It seems to me, that should lower Plug's value a bit more than the mere 6% by which HSBC lowered its price target !
Moreover, contrary to HSBC's assertion, Plug Power actually did burn a lot of cash last year -- $1.8 billion-worth, according to a tally by S&P Global Market Intelligence. While it's true that a $1.6 billion government loan, plus $1 billion raised from new stock sales, will allow Plug Power to continue burning cash for another 1.5 years or so, that's not necessarily a great reason to buy the stock.
