Key points
- Plug Power has resolved its going concern issue, but significant stock price concerns still remain.
- Short interest and lack of profits are weighing on the stock and dilution is likely in 2024.
- The stock is melting, but the ceiling is near and a new low could occur soon.
- 5 titles we like most about Plug Power
Connect the power NASDAQ: PLUG shares rose 10% following Q4 release and fiscal year update; however, now is not the time to buy these stocks except speculatively. The company has moved on and says there is no longer concern about its ability to operate, but there is still significant concern about the stock price. Fourth quarter details fall short of what the market was looking for, liquidity is still an issue, and dilution will weigh on stock prices this year.
The company’s ability to continue operating hinges on its inventory, cash flow and cash reserves. Inventories and revenue are rising, aiding the prospect of self-sufficiency, but losses are mounting and liquidity is shrinking. Current liquidity and inventories are not sufficient to offset the losses recorded for 2023. Spending is expected to continue rapidly in 2024 as new projects start and existing ones complete, so additional capital will be needed.
Maximum earnings of dilution and short selling in the outlet
The additional capital will come from B. Riley, which has entered into an aftermarket offering worth $1 billion in cash for Plug Power. The $1 billion is enough to sustain the company through the end of this year and into the next, but will have a significantly dilutive impact on shareholder value if used in full. $1 billion is 37% of post-release market capitalization, and there is no guarantee that additional funding will not be needed in 2025.
This is a factor in short interest, which is high. As of mid-February, the stock was short nearly 30%, a figure that is unlikely to change anytime soon. The combination of no profits, weak cash position, and declining shareholder value have put this stock on track to trend lower in 2024. The share count is up 2.75% in 2023 and will likely rise from a high single digit to low double digit. in 2024. Equity capital is also declining, with cash down 80%, current assets down 45%, total assets down 15%, and liabilities up. Equity declined 27% in 2023 and will likely decline significantly in 2024.
Sell-side sentiment could put a cap on the outlet
Sell-side sentiment is mixed at Plug Power, but some details suggest a bottom is afoot for this green energy company. Analysts cut their ratings enough in 2023 and the first two months of 2024 to put PLUG on Marketbeat’s lowest-rated and most downgraded stocks lists, but they still hold and see upside of about 75% from to consent. The caveat is that the price target is down 75% from last year, and the most recent targets see the market as fairly valued at current levels, so an analyst-led rally is unlikely.
Institutions support the basis of price action. Institutions bought these shares on balance in all four quarters of 2023 and quarter-to-date in 2024, with buying activity increasing in the first quarter of 2024. They own 50% of the shares, including funds and private capital, with BlackRock and Vanguard leading by nearly 20%. The largest institutional shareholder is SK Inc., a Seoul-based value investor. Plug Power is his tenth largest holding.
The technical outlook: the socket melts, the resistance is in sight
The price action in Plug Power is melting away. The action is helped by short coverage and news, but significant resistance looms. The stock could rise to $4.60 or $5.00, a solid gain for short-term traders, but an upward move is not expected. The $5 level has limited gains for several quarters and is unlikely to weaken now. The most likely scenario is that this level produces another sell signal, leading to a retest of the recent lows around $2.75.
Before you consider Plug Power, you’ll want to hear this.
MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Plug Power wasn’t on the list.
While Plug Power currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.
View the five stocks here
Are you looking to generate income with your stock portfolio? Use these ten actions to generate a safe and reliable source of investment income.
Get this free report