Morgan Stanley Analysts Lower Plug Power PT by 60%
Plug Power shares fell nearly 5% ahead of market open on Monday after Morgan Stanley cut their price target on the stock.
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Morgan Stanley analysts cut the price target for Plug Power’s (NASDAQ: PLUG) from $9 to $3.5 on Monday in the wake of the company’s worrying Q3 report that raised concerns about its ability to continue operating without new capital. Plug Power’s shares fell by 4.8% in Monday’s premarket, following a 40% crash on Friday.
Morgan Stanley Trims Plug Power Price Target to $3.5
Plug Power saw its stock price slide ahead of the market open on Monday after Morgan Stanley analysts reduced the price target for the hydrogen fuel cell system maker after it recently issued a going concern warning. Shares fell more than 4.8% in the premarket.
In their note, strategists at Wall Street’s banking giant trimmed their price objective on Plug Power to $3.50 from $9.00, citing expectations that “valuation pressure will remain until the company, at a minimum, improves its liquidity position.” Additionally, Morgan Stanley added that the company must take decisive action to boost its gross margins, slash costs, and lower working capital needs to manage cash burn.
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Plug Power’s Going Concern Warning Sends Shares to 3.5-Year Low
Morgan Stanley’s response comes just days after Plug Power issued a Q3 report, which rang alarm bells about the company’s financial health. The highlight of the report was the going concern warning, which signals significant doubt that the company can continue operating normally without securing additional capital and having to liquidate a portion of its assets.
Furthermore, the clean energy company missed Q3 sales estimates by around $23 million and earnings per share expectations by about $0.16. The key driver of disappointing results was “unprecedented supply challenges,” Plug said, leading to hydrogen shortages. In addition, the firm continuously grappled with inflationary pressures.
Morgan Stanley analysts confirmed that the going concern warning indicated that Plug Power must raise fresh capital to remain afloat.
The quarterly report sent the stock plummeting by more than 40% on Friday to a 3.5-year low of $3.53. Currently, Plug’s shares are trading above an important support of $3.23. Losing this ground would pave the way for the stock to drop further to the next major support zone at around $2.5.
Do you think Plug Power will manage to secure fresh funding or is more likely to file for bankruptcy? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
