After a brutal November, shares of Plug Power (PLUG 1.26%) headed even lower this week and were trading down 11.5% lower through 2 p.m. ET Friday, according to data provided by S&P Global Market Intelligence. Several analysts have turned cautious about the hydrogen stock's prospects in recent weeks, with yet another joining the league two days ago.
One analyst sees risk in Plug Power's business model
Arthur Sitbon from Morgan Stanley downgraded Plug Power's rating this week and cut his price target on the stock from $3.50 apiece to $3 a share. The stock was changing hands for about $4 apiece as of this writing. The analyst is worried about Plug Power's operational performance and liquidity amid deteriorating hydrogen economics.
Plug Power stock plummeted last month when it reported only 5% year-over-year growth in revenue and a negative gross margin of 69% for its third quarter. The company blamed supply constraints, driven primarily by multiple force majeure events in the liquid hydrogen market in North America. Plug Power also admitted it will need more cash to fund operations and is, therefore, pursuing several options to raise money, including debt.
Why investors are losing faith in Plug Power stock
Investors expected Plug Power to report better margins in the third quarter, especially after the company projected exponential growth for itself in the coming years at its recent annual event. That was not to be, and investors and analysts alike are now increasingly questioning Plug Power's ability to meet its lofty goals of generating $20 billion in revenue and a gross margin of more than 35% by 2030.
Plug Power believes its "new platforms," like electrolyzers, liquefiers, and cryogenics, will soon overtake its traditional material handling business in terms of revenue, and that should also help the company improve its margins and hit its long-term targets. All this may sound good to hear, but whether Plug Power can ever convert those promises and goals into real numbers remains the biggest question for now.
