The future of hydrogen-technology stock, Plug Power (ticker: PLUG), hangs in the balance as it grapples with a series of setbacks. The company's latest earnings report, released late Thursday, revealed significant financial strain, leading to a staggering 29% drop in premarket trading on Friday.
Unforeseen supply challenges, causing hydrogen shortages, have been the primary cause behind Plug Power's recent struggles. Compounded by rising inflationary costs, the company finds itself in a precarious position. While there is hope for supply issues to stabilize by year-end, the urgent need for additional funding takes precedence.
Amidst a challenging financial landscape, Plug Power must seek a government tax credit and potential loan as possible lifelines. The outcome of these endeavors will undoubtedly shape the company's future trajectory.
Plug Seeks Financing Options and Waits for Tax Credit Guidance
Plug, a leading company in the hydrogen industry, is actively exploring various avenues to strengthen its financial position. Among its priorities is pursuing a potential loan worth $1.5 billion from the Department of Energy. Additionally, Plug is considering corporate debt and partnership deals as alternative financing options.
One key development that Plug is eagerly anticipating is the guidance for a planned tax credit related to hydrogen production in the United States. The expectation of government support for the hydrogen sector has been a source of optimism for analysts. However, as time is of the essence, Plug could certainly benefit from positive news in the near future.
While the potential DoE loan holds promise, KeyBanc analyst Sangita Jain advises caution, suggesting that even if it gets approved, it may not alleviate short-term liquidity concerns in a timely manner. This could lead to increased financing costs for Plug during this waiting period.
Jain, who rates the stock as "Sector Weight" and does not provide a specific price target, highlights the challenges Plug faces.
In Q3, Plug reported a loss of 47 cents per share, compared to a loss of 30 cents per share during the same period the previous year. Although revenue saw a 5% increase to $199 million, it fell short of the $220 million expectations from a FactSet poll.
The company's shares have already experienced a significant decline of 52% so far this year, underscoring the cautious outlook for hydrogen stocks due to the lengthy timeline required for green-hydrogen production to scale significantly.
