After soaring more than 60% through April, shares of Plug Power (NASDAQ:PLUG), a global leader in fuel-cell solutions, fell back to Earth in May. The stock dropped 19% during the month on the heels of a lackluster first-quarter earnings report and analyst downgrade.
Failing to recognize top-line growth, Plug Power reported $15.2 million in the first quarter -- a slight decrease over the $15.3 million that it reported during the same period last year. This may have been disheartening for investors, but there were much more troubling financial results to focus on.
According to Morningstar, Plug Power reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of negative $17 million in the quarter, the lowest amount since Plug began reporting revenue utilizing its new Power Purchase Agreement financing in Q1 2016. Turning to the company's cash flow, investors found even more cause for concern. Whereas Plug Power reported an operational cash outflow of $6.9 million in Q1 2016, it reported $23.9 million in cash used in operating activities for Q1 2017.
Adding fuel to the fire, Roth Capital downgraded the stock to sell, and cut its price target from $2.25 a share to $1.30. According to an article on StreetInsider.com, Roth's analyst, Craig Irwin, cited "obvious customer attrition and poor quality of revenue, earnings, and gross margins going forward" as reasons for the downgrade.
Shares of Plug Power may have skyrocketed after the company announced its deal with Amazon, but the Q1 earnings report illustrates how -- blockbuster deals notwithstanding -- Plug Power's success is anything but certain. And even though the company reaffirmed its outlook of $130 million in fiscal 2017 revenue, it also forecast using between $25 million and $35 million in cash from operating and investing activities.
Considering Plug used $88 million in cash from operating and investing activities in fiscal 2016, the company's estimate for this year may seem like a step in the right direction, but investors should take this with a grain of salt. Early in 2016, management forecast using less than $20 million in cash from operations for fiscal 2016. It was a bit off, though -- Plug reported $30 million in operational cash outflow for the year.