Plug Power (NASDAQ: PLUG) shares shot up 10% following the Q4 release and FY update; however, it is not time to buy this stock in any other way than speculatively. The company turned a corner and says there is no longer concern about its ability to operate, but there is still significant concern about the share price. The Q4 details are less than what the market was looking for, cash is still a problem, and dilution will weigh on stock prices this year.
The company’s ability to continue as a going concern centers on its inventory, cash flow and cash reserves. The inventory and revenue are increasing, aiding the outlook for self-sufficiency, but losses are mounting, and the cash pile is dwindling. The current cash and inventory are insufficient to offset the losses posted for 2023. Spending is expected to continue rapidly in 2024 as new projects begin and existing ones are completed, so additional capital will be needed.
Dilution and Short-Sellers Cap Gains In Plug Power
The additional capital will come from B. Riley, which entered into an at-the-market offering worth $1 billion in cash for Plug Power. The $1 billion is enough to see the company through to the end of the year and into the next, but will have a significantly dilutive impact on shareholder value if used in full. $1 billion is 37% of the post-release market cap, and there is no guarantee that additional funding won’t be needed in 2025.
This is a factor in the short interest, which is high. The stock was nearly 30% short in mid-February, which is unlikely to change soon. The combination of no profits, weak cash position, and dwindling shareholder value have this stock on track to trend lower in 2024. The share count increased by 2.75% in 2023 and will likely increase by a high-single to low-double-digit figure in 2024. Shareholder equity is also falling, with cash down 80%, current assets down 45%, total assets down 15% and liabilities rising. Equity fell by 27% in 2023 and will likely fall significantly in 2024.
Sell-Side Sentiment May Put a Floor In Plug Power
The sell-side sentiment is mixed in Plug Power, but some details suggest a floor is in place for this green energy company. The analysts cut their ratings enough in 2023 and the first two months of 2024 to put PLUG on Marketbeat’s Lowest Rated Stocks and Most Downgraded Stocks lists, but they’re still holding and seeing about 75% upside at the consensus. The caveat is that the price target is down 75% compared to last year, and the freshest targets view the market as fairly valued at current levels, so an analyst-driven rally is unlikely.
Institutions support the floor in price action. The institutions bought this stock on balance in all four quarters of 2023 and quarter-to-date in 2024, with buying activity ramping in Q1 2024. They own 50% of the stock, including funds and private capital, with BlackRock and Vanguard commanding nearly 20%. The largest institutional shareholder is SK Inc., a Seoul-based value investor. Plug Power is its 10th-largest holding.
The Technical Outlook: Plug Power Melts Up, Resistance Ahead
The price action in Plug Power is melting up. The action is aided by short-covering and news, but significant resistance is ahead. The stock may increase to $4.60 or $5.00, a solid gain for short-term traders, but a higher move is not expected. The $5 level has capped gains for several quarters and is not likely to weaken now. The most likely scenario is that this level will produce another sell signal, leading to a retest of recent lows near $2.75.
