Shares of Plug Power Inc PLUG dropped significantly in the premarket session on Wednesday despite the company’s announcement of the launch of the largest U.S. green hydrogen plant.
According to BMO Capital Markets, the company faces an “increasingly arduous path” to securing the DOE loan for setting up additional hydrogen plants.
The Bearish View: Ameet Thakkar downgraded Plug Power from Market Perform to Underperform and slashed the price target from $3.50 to $2.50.
The Concern: Thakkar noted that the company’s annual update call led to a 31% surge in the stock. However, despite the submission of the final term sheet for approval of the $1.6 billion conditional DOE loan guaranty, and the commencement of production of liquid hydrogen at the long-delayed Georgia plant, there is uncertainty regarding the timing and certainty of the DOE funding.
“Furthermore, even with $1.6 billion in DOE funding, we are skeptical of value accretion of PLUG’s additional hydrogen plants,” Thakkar emphasized.
“Even if PLUG manages to secure DOE funding in 3Q 2024, we worry that 45V uncertainty implies worse-than-estimated margins on H2 production. DOE requirements such as credit subsidy cost and potential amortization are factors that imply more downside to our LT estimates,” Thakkar further wrote
Stock Movement: Plug Power’s shares declined by 1.61% to $3.66 in premarket trading on Wednesday.
Image: Shutterstock
