Plug Power's (PLUG 1.26%) liquidity issues came to the forefront last November when the company issued a going concern warning, saying its cash balance and equity securities wouldn't be enough to run operations for the next 12 months. Fast forward to its latest earnings release on March 1, and Plug Power said it has "resolved the going concern issue."
That's a major development, but it doesn't mean Plug Power is out of the woods yet. At the same time, most analysts remain bullish on the hydrogen stock. Analyst James West from Evercore ISI cut down Plug Power's stock price target to $6 a share from $9 per share but maintained an outperform rating. West's fresh price target still represents nearly 55% upside in Plug Power from Monday's closing price.
Why are analysts still bullish about Plug Power stock?
Plug Power's revenue growth has decelerated in recent quarters. Until late last year, Plug Power projected $1.2 billion in revenue for 2023 but ended up reporting revenue of only $891 million, or just 27% growth over 2022. Worse yet, it reported a negative gross margin of 57% for 2023 versus 27.7% in 2022.
However, there are several reasons why some analysts still see strong upside in Plug Power stock.
Plug Power's agreement with investment bank B. Riley Securities to sell stock worth a little more than $1 billion over the next 18 months or so should take care of funding for now. Plug Power also secured a term sheet recently from the Department of Energy (DoE) for a loan of $1.6 billion, and management now expects to receive conditional approval for the loan this month itself. Meanwhile, Plug Power is cutting capital expenditures to reduce cash burn and expects costs to come down substantially as its Georgia plant becomes fully operational.
All of this may sound encouraging, but investors may want to wait until they see an improvement in Plug Power's numbers before betting on the stock.
