Shares of Plug Power Inc. experienced a substantial boost of 31% following the recent announcement of a new funding arrangement. Despite the positive news, BMO Capital Markets analyst Ameet Thakkar remains skeptical about the company's future prospects.
Thakkar turned bearish on Plug Power's stock on Wednesday, expressing concerns over the potential hurdles the company may face in securing funds from the Department of Energy loan facility. While he acknowledged some positive aspects highlighted during the company's business-update call, Thakkar believes there is an "increasingly arduous path" ahead for Plug Power before it can expect to receive the mentioned loan.
Though some investors may see the recent developments as a sign of progress, Thakkar remained cautious. He noted that Plug Power's timeline for securing the Department of Energy loan appears overly optimistic. Moreover, the company will need to address financial challenges, including a significant year-over-year improvement in negative cash flow from operations, reduced capital expenditures, and decreased reliance on equity financing.
While Plug Power has taken steps to curtail capital spending and prioritize transactions that generate immediate free cash flow, Thakkar believes these actions are long overdue. However, he anticipates that the company will still need to issue "hundreds of millions of equity" in the first quarter due to revenue pressures, potentially impacting the stock.
To raise capital, Plug Power announced a stock sale agreement of up to $1 billion with B. Riley Securities. Although this move aims to support the company's financial position, Thakkar remains doubtful about its effectiveness.
Due to these concerns, Thakkar downgraded his rating on Plug Power's stock to underperform and adjusted his price target to $2.50 from $3.50. As a result, the stock experienced an initial increase but declined by over 2% in Wednesday morning trading.
In summary, despite the recent funding announcement, Plug Power faces significant challenges, which Thakkar believes may hinder the company's progress moving forward.
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