Plug Power (PLUG 2.28%) stock may have already lost two-thirds of its value over the past year, but one Wall Street analyst thinks there are further declines ahead. In a recent research note, Citigroup stock analyst Vikram Bagri downgraded the hydrogen fuel company from a neutral to a sell rating.
The analyst also reduced his price target for Plug from $3.25 to $2 per share. That would represent another 36% drop for Plug stock, taking it to new multi-year lows. Let's learn more about his thinking.
Sell Plug Power on the financials, says analyst
For Bagri, it's all about the company's financial position. The analyst thinks Plug Power's "limited" liquidity, ongoing dilution from raising needed capital, cost structure, and even competition will continue to drive shares lower.
Those capital raises have diluted existing shareholders already over the last year. In February, the company issued 77 million new shares to raise about $300 million. That represented a 13% increase in shares, and the company could raise an additional $700 million with future share offerings.
That's the crux of the analyst's bearish call on Plug stock. While the company has begun producing hydrogen at two new plants, it has a long way to go to attempt to reach profitability. In addition to the share dilution, Plug has also issued bonds to raise capital recently. The 7% coupon rate from that issuance last month will also add to debt expense as it works to build its hydrogen production and fuel cell business.
The Citigroup analyst sees business success as an uphill battle as well. Plug faces growing competition for electrolyzer sales. That will make it more difficult for Plug to reach profitability as the weight of debt expense increases after existing shareholders have already experienced dilution. Shareholders may want to sell now and wait on the sidelines as the stock is likely to fall before it has any chance to rebound.
