Plug Power, based out of Latham in Upstate New York, is one of the leading names in hydrogen power and fuel cell energy generation in the United States. The company has recently reported third-quarter losses of $283.5 million (47 cents per share), widening from a loss of $170.8 million (30 cents per share) in the same quarter a year ago.
Plug Power's revenue has gone up to $199 million from $189 million a year earlier and slightly missed the Bloomberg Consensus estimate of $200.2 million.
In a shock, Plug Power reported that this year's performance was negatively affected by "unprecedented supply challenges in the hydrogen network" in North America. The company pointed to a severe hydrogen shortage that also "negatively affected the direct cost of service as well as the timing for implementation of fleet upgrades into customer operated equipment."
According to the company, the negative impacts were made worse by inflation. Plug Power believes that the hydrogen supply challenge is a transitory issue, particularly because it expects that its Georgia and Tennessee facilities will produce at full capacity by year-end.
And while supply chain issues are one obstacle for Plug Power, the company warned that existing cash and available-for-securities and equity securities will not be enough to finance its operations over the next 12 months.
The company also warned that current conditions and events raise "substantial doubt about the company's ability to continue as a going concern."
Chris Dendrinos, an RBC Capital Markets analyst, thinks that Plug Power would need more than $750 million to boost liquidity over the next 12 months.
In a note, Dendrinos explained that "[Plug Power] management expressed confidence in executing a liquidity transaction near-term and continues to see a path for margin improvement through next year. However, at this time we think it prudent to move to the sidelines and await execution of these events."
Meanwhile, Canaccord analyst George Gianarikas maintained his Hold rating on shares but reduced his price target to $5 from $10. In a report, he pointed out that many companies he follows have also gone through similar supply-chain problems.
However, Gianarikas expects "additional profitability proof points, stabilization in operations, and additional guidance from [the] Treasury before turning more positive on the stock." (Related: Aussie gov’t to spend $1.32B on hydrogen power project, but fears of "hydrogen fraud" loom.)
To save itself from bankruptcy, Plug Power is eyeing corporate debt and partnership deals and even a potential $1.5 billion loan from the Department of Energy (DOE). The company is also waiting on guidance about a planned tax credit for companies that produce hydrogen energy in the United States.
Expectations of government support for the hydrogen industry have resulted in optimism among some analysts, but Plug Power could do with good news sooner rather than later.
Sangita Jain, a KeyBanc analyst, advised that it would be better if a potential $1.5 billion loan from the DOE to relieve short-term liquidity concerns could be approved more quickly. The company said that cash and equivalents at the end of Sept. 30 stood at $110.8 million.
J.P. Morgan analyst Bill Peterson believes that even though a company like Plug Power has what it takes to "cycle past its current cash flow issues," current operating and capital markets environments are challenging.
Peterson added that Plug Power's shares could be range-bound over the next several quarters until "clarity around its balance sheet are sorted out."
Aside from a meltdown in the hydrogen space, Plug Power's current issues are proof of President Joe Biden's renewable space being in a full-blown crash. After all, factors like inflation, high interest rates and waning demand have sent wind and solar stocks in a steep decline for the last few weeks.
Go to NewEnergyReport.com for more articles about hydrogen power and other energy sources.
Watch the video below to learn more about hydrogen fuel cells.
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