Plug Power Stock Is Tanking Despite Sales Beating Expectations. Here’s Why.

Sales beat estimates. That’s a positive. What’s more, Plug reiterated its guidance for full-year 2023 sales of $1.2 billion to $1.4 billion. The $1.3 billion midpoint implies Plug will generate roughly $830 million in sales in the second half of 2023. Wall Street is currently projecting about $827 million.

Despite the sales beat, shares were down almost 10% in premarket trading Thursday at $9.73 each, while

S&P 500
and

Nasdaq Composite
futures were up about 0.5% and 0.6%, respectively.

Earnings are a disappointment, but production guidance is likely the bigger factor for investors.

Plug has several hydrogen-making facilities under development. A plant in Georgia is producing hydrogen, which can be used in fuel cells or burned to produce power. Hydrogen doesn’t generate any carbon dioxide when consumed. Carbon dioxide is the main gas blamed for global climate change.

When hydrogen is made by passing electricity generated from renewable sources through water it’s called green hydrogen because no carbon dioxide is generated at any point in its production. Hydrogen can also be produced from natural gas and electricity produced by burning fossil fuels. Plug is making green hydrogen.

Plants in Louisiana, New York, and Texas are now slated to achieve full production in 2024. Prior guidance for Louisiana was for late 2023. The other two were for the first half of 2024. Timelines seem to have slipped about six months.

“Management remained very optimistic about its ability to achieve its expected financial targets,” wrote TD Cowen analyst Jeffrey Osborne in a Wednesday report. “But given the scar tissue built up over the past quarters and continued delays in project timelines, we see expectations skewing toward the lower end for 2023.”

Plug is starting green-hydrogen production of 500 tons a day by the end of 2025.

Osborne is still optimistic, too. He rates shares Buy and has a $23 price target for the stock. BTIG analyst Gregory Lewis also rates shares Buy. His price target is lower at $14 a share.

“We note the Georgia plant faced more delays during Q2 and is now expected to reach about 14 tons a day of liquid hydrogen production later this quarter,” he wrote in a Wednesday report. “Management noted the construction delays were driven by weather.”

Both analysts see the long-term picture intact, but investors don’t like to see near-term delays.

Overall, Plug remains popular on Wall Street, with 67% of analysts covering the stock rating shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $18.50 a share, almost $8 above where the stock closed on Wednesday.

Revenue growth from the hydrogen business is part of the reason Wall Street likes the stock. Analysts project revenue will hit $3 billion in 2025, up from $1.3 billion in 2023.

Write to Al Root at [email protected]