What happened

After losing 12.6% value in February, Plug Power (PLUG -9.82%) stock has tumbled another 7% so far this month, according to data provided by S&P Global Market Intelligence. 

The hydrogen stock has attracted several analyst downgrades in recent weeks, and it all started after Plug Power slashed its outlook for 2022 in late January. Although the company has outlined ambitious financial targets through 2030, investors are afraid these might be difficult to achieve and will limit the upside potential in the stock from here.

So what

Plug Power earlier expected to grow revenue by almost 80% in 2022. Just weeks before its fourth-quarter earnings release, though, the company said it sees only 45% to 50% growth in revenue for the year.

The real number was much lower: Plug Power generated $701 million in revenue in 2022, up only 40%. Worse yet, it reported a negative gross margin of 28% for the year.

Management admitted that the company's performance fell short of its own expectations and put the blame on three factors: rising natural gas costs, obstacles during new product launches, and a delay in the construction of a hydrogen plant.

To be sure, it was a record quarter and year for Plug Power, but investors in a growth stock don't expect sales growth to decelerate and want the company to provide some visibility into when it can break even. Plug Power is falling short on both fronts right now.

Project delays and execution risks in particular upset the market and compelled some analysts to cut their price objectives on Plug Power stock. Notable ones include:

  • Piper Sandler (PIPR -1.03%) analyst Kashy Harrison cut Plug Power stock's price target to $17 per share from $20.
  • KeyBanc analyst Sophie Karp reduced the stock's price target to $25 from $30.
  • Citi analyst PJ Juvekar lowered the  price target to $20 from $21.

Now what

Green hydrogen holds much promise as an alternative fuel, and Plug Power is a front-runner in the industry with big expansion plans. It is making electrolyzers, fuel cells for stationary power and transportation, and building the largest green-hydrogen plant in North America.

Plug Power expects higher electrolyzer and stationary-product sales, in particular, to boost its revenue in 2023 to $1.4 billion. And it aims to dramatically turn around a negative product gross margin of 8% in 2022 to a gross margin of 10% this year.

It has set out big goals for the medium and long term:

  • By 2026, it expects $5 billion in annual sales and a product gross margin of 30%.
  • By 2030, it is targeting $20 billion in annual sales and a product gross margin of 35%.

Yet what investors expected from Plug Power's earnings report was at least some hint into when the company will be able to turn a net profit. With no mention of that anywhere, not many investors are willing to bet on the stock anymore.