Plug Power (PLUG 7.21%) sent shockwaves among investors some months ago when it issued a "going concern" warning. Management has tried hard to pacify investors since, and some of the updates it provided in late January even sent the hydrogen stock surging more than 40% in the last week of the month.
All eyes have been on Plug Power's earnings report since, with investors hoping for some more good news. The company seems to have succeeded, or so it seems from the way Plug Power stock made a U-turn on Friday, jumping into the green as the day progressed after slumping more than 10% at one point in early-morning trading.
Is this a sign to buy Plug Power stock?
Plug Power's addresses going concern issue
Plug Power's revenue rose 27% in 2023, but its total revenue of $891 million fell short of the company's outlook of $1.2 billion issued late last year. Moreover, Plug Power's net loss nearly doubled to $1.4 billion in 2023.
NASDAQ: PLUG
Key Data Points
The highlight of the earnings report, however, wasn't the numbers, but something huge that management said. It stated that Plug Power has resolved the going concern issue, and that the company has enough cash and liquidity to fund its ongoing operations "for the foreseeable future." In November last year, Plug Power said its cash and available equity securities for sale weren't sufficient to fund operations for the next 12 months.
So what has changed since?
Well, Plug Power entered into an agreement with investment bank B. Riley Securities in January this year to sell stock worth a little more than $1 billion, and it believes the proceeds from such a share sale will be sufficient to fund operations for at least the next 12 months. Plug Power says the earlier substantial doubt about its ability to continue as a going concern, therefore, no longer exists.
Is Plug Power stock a buy now?
Investors are evidently betting on Plug Power "resolving" its going concern issue today, but it's too early to turn bullish. Plug Power's revenue growth is decelerating, and its high costs are eating into its bottom line. Also, whatever money Plug Power raises from the share sale could primarily be used to run its day-to-day operations, meaning the company still requires a lot of money to fund its growth plans.
Even if Plug Power secures a loan from the Department of Energy later this year, as it expects to, I wouldn't touch the stock until its numbers show what investors want to see: higher revenue growth, lower costs, and better margins.
